Virgin Group boss Richard Branson says Qantas sought financial help from the federal government so it could flood the market with flights and drive Virgin Australia out of business. 

The British billionaire said Qantas only needed help when it went "cap in hand" to the government in early 2014 so it could continue to fund a capacity war with Virgin. 

"They poured hundreds of millions of dollars into overcapacity into routes we were flying on, and they literally almost drove themselves out of business,"  Mr Branson, whose group owns 10 per cent of Virgin Australia, said at the launch of Virgin's new Melbourne to Hong Kong service on Wednesday morning.  

"Government quite rightfully told them it's up to them to compete on a fair, level playing field. And they went back and stopped dumping tonnes of capacity on routes and behaving more sensibly.

"The end result is they proved that they did not need those billions they were asking government for."

Qantas was hemorrhaging money at the time and said a government debt guarantee would allow it to compete with Virgin, which is backed by large foreign airlines.

Mr Branson said the then-Abbott government was close to backing Qantas, which could have meant the end of Virgin. 

"We had to lobby very hard to say, look, do you want two airlines in Australia or do you want one airline in Australia?" he said. 

Both airlines were damaged in the protracted capacity war which ended in mid-2014. Qantas has since gone on to post record earnings, but Virgin has struggled to reach profitability.

Virgin tapped its large investors for another $1 billion last year to fund a turnaround plan that involves simplifying its fleet, cutting costs out of the business and targeting Qantas' premium customers.  

Virgin Australia chief executive officer John Borghetti said the airline's new service to Hong Kong was the start of an expansion into Asia.

The airline has applied for 21 slots at Hong Kong, and has hinted it is close to securing a new route to a Chinese mainland city. 

Virgin will link up with airlines run by its two major Chinese investors, HNA Group and Nanshan, which each own about 20 per cent of Virgin. 

Mr Branson said that his 10 per cent stake would be "one of the last things I would ever sell". 

Etihad and Singapore Airlines own another 20 per cent each, leaving just 10 per cent of the company's shares in free float. Mr Branson would not comment on whether the ASX-listed airline would remain a public company. 

Virgin ran at a $69 million loss in the third quarter, blaming soft domestic demand. On Monday, it said it would report positive cash flow of up to $50 million for the financial year just ended, up from negative $90 million in 2016.

Ratings agency S&P last week upgraded its outlook for Virgin from negative to stable, meaning it's unlikely to lower its credit rating in the foreseeable future.