Nationals Leader David Littleproud has walked back his colleague's proposal to use the threat of break-up powers against Qantas and Jetstar if the national carrier behaves anti-competitively.

Shadow Transport Minister Bridget McKenzie on Monday morning proposed the government could introduce aviation break-up powers to improve the behaviour of the Qantas and Virgin duopoly.

"The Australian travelling public doesn't expect much," Senator McKenzie said.

"It expects its planes to take-off and land safely and on time, their bags to arrive in the same place they do, and to be able to afford a ticket."

The Coalition has already adopted a Nationals proposal for similar divestiture powers in the groceries sector, saying the oversized market share of Coles and Woolworths has distorted competition there.

Senator McKenzie suggested the same powers could be introduced for the airlines, adding that while the Coalition did not want to force a sell-off, the threat alone could be effective. 

But hours after that suggestion, Mr Littleproud took to Sky News where he said it was too early to pursue airline break-up powers like those it has pushed for supermarkets.

"This is a sensible look at competition to ensure we have cheaper airfares ... this is a calm, methodical way of working through competition policy for airlines, as we did in identifying the evidence that was stark in terms of supermarkets," Mr Littleproud said.

"We haven't taken that step yet."

Mr Littleproud said the Coalition was seeking to have the issue considered by Treasury.

Transport Minister Catherine King dismissed the issue as a "thought bubble" by Senator McKenzie.

Treasury finds competition on some routes could cut airfares by a quarter

The federal government recently laid out its policy direction for the aviation space in a much-anticipated white paper, in which it recommended an ombudsman authority that could compel airlines to improve their customer service.

It also recently moved to shake-up how slots are allocated at Australia's busiest airport in Sydney, amid claims of anti-competitive "slot hoarding" by Qantas and Virgin.

But Senator McKenzie criticised the government's white paper for having "no specific measures to get planes running on time [or] address the spiralling cost of airfares".

A spokeswoman for Ms King said the Coalition "either has not read or not understood" the white paper, which contained significant reforms to the sector.

A Treasury review of competition between airlines found greater competition would reduce price growth, and when a second competitor was added to a route it reduced air fares on that route fell by a quarter.

It also found Qantas would respond differently depending on whether Jetstar or a competitor entered a route.

Qantas lowered its prices when a "non-affiliated" competitor entered a route, but would raise them when Jetstar entered the route, "suggesting the presence of Jetstar allows Qantas to exercise a greater degree of price discrimination".

Senator McKenzie said the Treasury's review identified that competition was a problem, and in the absence of a plan to improve competition, Treasurer Jim Chalmers should consider break-up powers for the airlines.

"Something has to be done about the ownership structure of Qantas," Senator McKenzie said.

"What I want to see, what the Coalition wants to see, is lower prices for the Australian travelling public."

While it has not been formally adopted as Coalition policy, Senator McKenzie said the concentration of market power in the aviation sector was even worse.

"We need to do something about the duopoly where 92 per cent of our aviation sector is controlled by two players. If that was the supermarket sector we would hammer them.

"When Qantas and Jetstar are the only two carriers into a given route, Qantas puts its prices up."

Shadow Finance Minister Jane Hume said the Australian public was frustrated by the hold Qantas and Virgin had on aviation.

"What Bridget and the Coalition are calling for the government to do is to do what the aviation white paper failed to do, and that is to include aviation in the Treasury's competition review," Senator Hume told Sky News.

"What we want to see is the [Australian Competition and Consumer Commission] to have more powers to understand and address collusion in the industry."

Speaking on Sky News, assistant minister Matt Thistlethwaite dismissed the idea of divestiture.

"We all want to see more competition and cheaper fares, but this is a crazy economic policy," he said.

"Let's say you do divest Qantas of Jetstar, who buys it? They're the questions the Coalition has been unable to answer."

Former competition chair backs break-up powers

The former chair of the ACCC, Allan Fels, has pointed to the United States as one example of where courts have the ability to break up companies that abuse their market power.

"It's a standard part of competition law [in the US]. [They] have a divestiture power used with great effect, but only occasionally and carefully used," he told The Business.

"And we should have the same law in Australia, a general power in our competition law to break up business in those places where it's been found by a court of law to have broken the law seriously and where the court considers that the best possible remedy is divestiture.

"And that would be how the proposal that has just been floated to break up Qantas should be considered under our law, with a due process requirement, but with a divestiture possibility."

He said having divesture powers in the competition armoury would have "a permanent, ongoing deterrent effect on firms from breaking the law" when normally to do so means not much chance of being caught.

"With regard to our own laws about misuse of market power, predatory behaviour, eliminating competitors unlawfully, it's not a powerful threat for business. They don't have to worry about it too much because the sanctions are so limited," he said.