Embattled airline Rex's expansion into capital-city routes was flawed from the start, an expert says amid attempts to rescue its regional services.
A government lifeline is being considered to engineer a safe landing as other carriers help thousands of customers scrambling to find replacement flights.
All Rex flights between major-city airports were cancelled after administrators from EY Australia were appointed on Tuesday night.
But Transport Minister Catherine King has pledged to work closely with administrators to ensure the airline maintains its flights outside capital cities, describing it as vital to many regional communities.
Around one-third of the airline's 2000 employees are expected to lose their jobs with the end of major-city operations, the Transport Workers Union has said citing estimates from administrators.
Rex has struggled with profitability since aggressively expanding in 2021 to compete on capital-city routes against Qantas and Virgin Australia.
Investment firm PAG made $150 million available to support those domestic jet operations and has been contacted for comment.
University of Sydney Institute of Transport and Logistics Studies deputy director Rico Merkert told AAP the capital-city route expansion is where the airline hit turbulence.
"Rex's decision (or) execution of competing on capital city routes was flawed from the get go," Professor Merkert said.
"Rex operated its Saab 340 network to regional centres quite successfully over many years."
Refinancing to rescue the regional network was a clear solution to the company's problems, he said, while aviation could also be more efficient with the removal of red tape around regional airports.
The administrators on Wednesday said the airline's regional carrier status would continue, while indicating Virgin had expressed interest in taking on some of Rex's grounded Boeing 737s.
Ms King did not rule out a government bailout, but said no figures had been discussed, and the focus was on regional flights continuing.
“It is a complex situation with multiple commercial arrangements in place, but we do stand ready to work very closely with the administrators, because that regional presence is absolutely vital," she said.
EY administrator Samuel Freeman forecast a "relatively short" administration period before new investment takes the business forward.
“There's a great prospect there is a future for Rex, and it's a strong likelihood it will be delivering services to the people of regional Australia,” he told ABC Radio.
Virgin is exploring selling Rex’s regional services through codeshare or interline arrangements, and providing frequent-flyer benefits.
The TWU has called for the federal government to buy an equity stake in Rex to minimise job losses and protect regional Australia.
"This is another dark day for aviation, with over 600 families faced with sudden joblessness in an industry that has taken hit after hit,” national secretary Michael Kaine said.
By early Wednesday morning, nearly 5000 Rex customers had contacted Virgin for a free transfer.
Many regional communities rely on the carrier, which emerged from Ansett's ashes in 2002.
Rex shares were suspended from trade on Wednesday after an earlier trading halt.
In February, the company reported a net loss of $3.2 million for the first half of the 2023/24 financial year.
