Embattled regional airline Rex will go up for sale again, as a debt lifeline paves the way for a second crack at finding a new owner.
The federal government will acquire $50 million of debt from Rex's largest creditor, private equity firm PAG Asia Capital, after it lurched into administration and stopped flying between metropolitan cities.
The purchase would stop the firm putting the carrier into liquidation and comprising critical regional services, Transport Minster Catherine King said.
"We're now stepping into their shoes, taking over the last remaining part of that substantial debt in order to provide an opportunity for a second sale process to continue," she told reporters in Werribee.
"Obviously, as a creditor, we would be seeking to get that money, that debt back through any second sale process."
The debt purchase will make the government Rex's principal secured creditor.
No credible bidders were unearthed in an initial sale process in mid-2024 when the company collapsed into administration with about $500 million in debts.
It is the second lifeline extended to Rex, taking the government's total investment to about $130 million after earlier providing a loan to keep regional routes open, cover staff entitlements and guarantee tickets.
In December, the corporate regulator announced it would take Rex and four directors to court for failing to reveal a $35 million shortfall until days before the financial year ended.
The Australian Securities and Investments Commission is attempting to have four directors disqualified over alleged corporate governance failures.
Industry bodies and unions have welcomed the move but called for a long-term solution for the sector.
Rex passenger Davide Michiela said the airline was crucial to the economy and Australian culture.
He was flying to King Island and chose Rex because he had the greatest confidence in the airline over other operators.
"It's a big country, so we need small, local airlines," he told AAP at Melbourne Airport.
Siblings Emily and Eli Cummins live in Mildura on the Victoria-NSW border and depend on Rex to reach Melbourne.
"It's quite hard sometimes to get flights out of Mildura and especially since soon I'll be going to uni in Melbourne it's important to be able to go home and see my family," Ms Cummins said.
"Other airlines (are) too expensive, Rex is pretty cheap," her brother added.
Opposition transport spokeswoman Bridget McKenzie said the coalition supported the debt lifeline but wanted to be consulted.
"I would welcome her approaching me to actually come up with and develop a bipartisan approach, rather than actually pushing off any decision - as the $50 million does - until after the election," the Nationals senator said.
The cost of flights between Australia's major eastern metropolitan cities has soared since Rex exited the market.
Data from travel booking website WebJet showed the average return airfare for a passenger flying between Melbourne and Sydney grew from $260 on July 30 to $378 on January 13 - up 45 per cent.
Over the same span, Sydney to Brisbane return airfares increased from $242 to $327 (35 per cent) and from $364 to $405 (11 per cent) for the Brisbane to Melbourne route.
But the average cost of all return domestic flights booked through the platform fell from $473 to $435.
