Bushfire-struck Kangaroo Island has been dealt a major blow, with regional airline Rex cancelling its services between Adelaide and the island.

Key points: Rex has accused Qantas of "dumping excessive capacity"

Rex has accused Qantas of "dumping excessive capacity" The airline has raised a complaint with the ACCC

The airline has raised a complaint with the ACCC Qantas began flying to Kangaroo Island in December 2017

The airline has also announced plans to scrap flights between Sydney and Ballina.

In a statement, Rex blamed the decision on its rival Qantas, accusing it of "dumping excessive capacity" or flooding the market with seats on money-losing routes.

Rex has raised a complaint with the Australian Competition and Consumer Commission (ACCC), claiming the impact of Qantas's conduct was to force out the smaller airline.

"Unlike Qantas, Rex is not able to continue servicing a money-losing route indefinitely," the airline said in a statement.

"The Rex Board has decided that in light of the sharp downturn experienced in the last six months and the poor economic outlook for the next 12 months, Rex will be exiting the Sydney to Ballina and Adelaide to Kangaroo Island routes in the coming weeks."

"Qantas has won this round, but in the longer term the communities are the real losers."

The airline has raised similar concerns for the Whyalla to Adelaide route.

Qantas accuses Rex of repeatedly 'throwing tantrums'

But Qantas hit back, saying Rex had a "track record for throwing tantrums when things aren't going according to their plan".

"Not long ago, they blamed us for the fact their pilots were applying for jobs with Qantas," the airline said in a statement to ABC News.

"Now it's because we've added services and given regional consumers more choice.

"We're focused on adding new routes to regions that we think have genuine growth potential — that includes stimulating those towns with more capacity, which helps build momentum and can grow the size of the pie over time.

"Rex blaming our capacity commitments as a reason for exiting Kangaroo Island after the devastating bushfires is a sad state of affairs."

Rex has complained to the ACCC, accusing Qantas of "dumping excessive capacity". ( ABC News )

Rex's announcement comes as the State and Federal Governments step up efforts to boost Kangaroo Island's tourist economy in the wake of devastating bushfires which have blackened almost half the island.

A campaign urging tourists to book out the island's accommodation is already underway.

Qantas began direct flights to Kangaroo Island in December 2017, with the arrival of the airline subsidised by South Australian taxpayers.

The airline later introduced seasonal flights between Melbourne and the island, a step Rex said further diluted the number of passengers travelling on its own service.