Virgin Australia won round 1 of its rivalry with flag carrier Qantas after the Takeover Panel allowed on Tuesday Virgin to pursue its controversial $350 million capital raising scheme that would boost foreign ownership and give the upstart airline more financial power to compete with the financially embattled Qantas.

In an announcement sent to the Australian Stock Exchange (ASX), The Takeover Panel said its decision "allows the Entitlement Offer to continue as planned on its original terms and timetable." The company also said that Virgin raising $350 million new capital would substantially keep the air carrier's share register structure and implied no change in control.

The report comes a day after Prime Minister Tony Abbot had expressed openness to hike the 49 per cent foreign ownership cap of Qantas, but said he was not sure if that was what the flag carrier wanted or if it would be the right strategy for Qantas to survive the stiff competition posed by Virgin which forayed into the business class market.

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Virgin's three major shareholders, made up of Air New Zealand, Singapore Airlines and Etihad, were the subject of complaint by the Australian Shareholders' Association for squeezing out retail investors.

In not objecting to Virgin's capital raising, the panel said shortfall in shares would be dispersed effectively by the three air carriers which are sub-underwriting the entitlement offer.

Virgin's entitlement offer to retail shareholders is scheduled to close on Monday, Dec 9.

Qantas sought the help of the federal government in November to block Virgin's capital raising because it would be financially detrimental to the flag carrier.

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