A change to Sydney Airport's flight slots would encourage greater competition among airlines and benefit customers, Australia's competition watchdog says.
Proposed reforms for flights at the nation's busiest airport would penalise airlines for deliberately cancelling services to maintain valuable slots at terminals.
Qantas executives were grilled on allegations the airline was misusing its slots, with the carrier denying it had behaved improperly.
Matthew Shroder, from the Australian Competition and Consumer Commission, said the level of competition at Sydney Airport was "less than we would like".
"Sydney's the main international gateway, but it's also the main domestic gateway to a lot of routes. So access to Sydney is critically important," he told Tuesday's hearing.
"That's why we support the reforms for the slot regime, because we think that will be more competitive."
Qantas Group and Virgin Australia currently service 98 per cent of domestic passengers.
Sydney Airport Chief Executive Officer Scott Charlton said the current rules were contributing to problems.
"We'll see more people home to their families, sooner, fewer missed appointments and less cancelled meetings," Mr Charlton said.
Changes put forward would limit delays and cancellations and improve performance across the entire national network, he said.
Mr Charlton said until recently the compliance committee, which looks at whether slots are being misused, had not met for five years.
He said the legislation would give more opportunity to new entrants by increasing the number of slots allocated to them, which would lead to more choice for passengers.
Qantas Domestic chief executive Markus Svensson said there had been 10 per cent more flights departing on time over the past six months.
"We do not apply for slots without having intention to operate them ... we categorically deny that we slot hoard and try any games," he said.
Asked if Qantas backed the changes, Mr Svensson said there were "some good things in it".
"Having more movements in case of disruption, that's a good thing.
"Transparency is a good thing."
Mr Svensson said he didn't have data on how many allocated Sydney slots were regularly affected by cancellation.
Australian Airports Association chief executive Simon Westaway said the proposed changes would "drive greater transparency" and help deliver better outcomes.
Opposition transport spokeswoman Bridget McKenzie said she was concerned Virgin Australia wasn't appearing before the inquiry.
"Qantas has been under a lot of criticism publicly for their use of the existing slot system, and it does you credit that you've actually taken advantage to front up ... I wish Virgin had have done the same," she said.
Senator McKenzie said the claim against Qantas was that it had been "gaming the system".
"It's been part of your business plan to game that system, and you've been very successful at it, because you are the gorilla in the room ... and you use that power to your advantage," she said.
Slots at Sydney Airport are limited to 80 take-offs and landings per hour.
Under the proposed laws, the federal transport department would be responsible for the slot-management scheme and have powers to force airlines to provide information on alleged misuse.
The laws will allow for the number of flights per hour at Sydney Airport to be increased if there is bad weather.
If flight landings or take-offs were affected by weather, the cap would be lifted to 85 flights per hour for two hours.
