SYDNEY, Feb 12 (Reuters) - The Australian government

said on Wednesday it was open to acquiring collapsed airline

Regional Express Holdings to ensure its regional

services continue, in what would be the first state ownership of

a carrier in the country in three decades.

Rex entered voluntary administration last July, cutting

hundreds of jobs and grounding its Boeing 737 flights

between Australia's major cities, though it continues to operate

smaller turboprop services to and from rural areas after the

government guaranteed the routes until June this year.

It owes about A$500 million ($314 million) to 4,800

creditors after failing to compete effectively with rivals

Qantas Airways ( QUBSF ) and Virgin Australia , which

together control 98% of the domestic aviation market.

Australia's Prime Minister Anthony Albanese said the

government still preferred a private sale of the airline, but it

was open to taking a direct stake should a buyer fail to emerge.

"We're determined to make sure that regional communities are

not left behind," Albanese told a press conference on Wednesday.

"If there is no sale, we will work on contingency plans with

relevant state governments, including the potential for

(government) acquisition."

Any nationalisation would be the first time the government

would hold an equity stake in an airline since it finished

privatising Qantas in 1995.

Albanese's centre-left Labor Party faces reelection in

nationwide polls that must be held by May, and has been courting

rural voters with additional funding across the country.

Vast distances between towns in Australia's interior and its

main cities such as Sydney mean rural communities are reliant on

regional flights provided by Rex for essential services,

including specialist medical needs.

The government has already provided a loan of up to A$80

million to keep Rex's regional routes operating until June and

last month acquired A$50 million of debt from the airline's

largest creditor.

($1 = 1.5939 Australian dollars)