Airline Rex is set to suspend its Burnie-Melbourne route and many others across the country.
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A further big government assistance package for airlines losing passenger numbers hand over fist due to coronavirus looks the only thing which could save the airline's regional routes outside of Queensland, where the state government underwrites its services.
Rex announced on Monday it was planning to end all regular passenger flights outside of Queensland from April 6, unless the federal and state governments were prepared to underwrite losses.
The decision would also stop Rex's King Island flights.
Rex (Regional Express) left open the possibility of a rethink depending on extra government support by the end of the week.
Deputy chairman John Sharp said Rex supported strong measures taken by the federal and state governments such as shutting state borders and discouraging non-essential travel.
"These measures will definitely reduce the number of infections from COVID-19, prevent the healthcare system from being overwhelmed and save many lives," Mr Sharp said.
"However, tragically for the airline industry, this means that we can expect the year-on-year reduction of passenger numbers to nosedive to around 80 per cent from the 60 per cent we are experiencing today.
"There is a tipping point in the airline business beyond which it will no longer be sustainable to operate reduced services.
"We believe that with only 20 per cent of our passenger numbers left we have reached that point and the Rex Group has decided that the quasi suspension of all services at this stage presents the best option to preserve its cash."
Burnie Mayor Steve Kons said Rex should have negotiated with governments first.
Cr Kons said he believed the partly council-owned Burnie Airport Corporation should talk to other airlines about potentially taking over the Burnie-Melbourne route.
He said he believed the route had been profitable for Rex and there should not be "special benefits for special people".
"The market will always resolve these issues," Cr Kons said.
"We'll wait and see what comes out of it.
"It (Rex) is a public company."
Deputy Prime Minister Michael McCormack, who was recently praised by Rex for a prompt airlines assistance package, said: "The government acknowledges calls for further support and will continue to work with industry in responding to this crisis."
"Our first priority as a government is the public health and safety of Australians.
"This core focus underpins every decision we are taking in response to this crisis."
Mr Sharp said: "If an assistance package of sufficient magnitude and viability can be negotiated by the end of the week, Rex may be able to reconsider its plans to suspend services."
"Failure to achieve any traction in this regard will see regional communities lose their air services for many months ahead and, even after this is all over, we are afraid that some of the more marginal communities will no longer have an air service.
"State and local governments should be leading the charge in extreme times like these to assist regional carriers rather than leaving it to the federal government."
Rex said passengers with bookings after April 6 must wait until after March 27 before writing in via Rex's website to put their bookings on credit for future flights.
It said no refunds would be offered.
Rex said that was standard practice for all airlines during the crisis.
The company said its Ambulance Victoria fixed-wing air ambulance services, charter contracts with mining companies, freight services and pilot training at its pilot academies in Victoria and New South Wales would not be affected.