The federal government could acquire Rex Airlines if a suitable private sector buyer can't be found for the embattled regional carrier.
The government will work with Rex administrators and shortlisted bidders to find a buyer committed to providing an ongoing and reasonable level of service to the regions, value for money and good governance.
If that falls through, Labor will begin working on contingency plans - including preparations for a potential Commonwealth acquisition.
"Regional Australians deserve access to quality and crucial regional aviation services," Prime Minister Anthony Albanese said.
"That’s why we’re taking steps to ensure the best possible deal for the sale of Rex."
This will be the second attempt to sell Rex after it fell into voluntary administration in mid-2024.
Questions were raised over the government's role in Rex's future after it acquired $50 million of debt from Rex's largest creditor to ensure the airline could continue operations and loaned up to $80 million so the carrier could run regional routes until the end of June.
Should Rex be nationalised, it would be the first time a federal government has owned an airline in three decades after Qantas was privatised in 1995.
"When markets fail or struggle to deliver for regional communities the government has a role to ensure people do not miss out on opportunities, education and critical connections," Federal Transport Minister Catherine King said.
"We are recognising that today and stepping in to keep these routes in the air."
The government has also guaranteed Rex's regional flight slots at Sydney Airport until October 2026.
It also revealed it will spend $12 million to upgrade regional airports across NSW.
This includes a $3.8 million investment in Merimbula Airport's runway extension, $5 million for runway upgrades at Albury Airport and other commitments at Mudgee, Griffith, and Moree airports.
The Transport Workers' Union said if Rex were nationalised it would be a significant turning point in building an aviation industry for the "public good".
“This announcement ... is a huge moment for the aviation industry," national secretary Michael Kaine said.
“This is a vital step towards a future where aviation actually works for the people of this country, not its overpaid executives."
