SYDNEY, Feb 11 (Reuters) - The Australian government

said on Tuesday it would work with interested buyers of

collapsed airline Regional Express Holdings to ensure

the airline's regional services continue, including a possible

nationalisation should a sale fall through.

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.

"We are working collaboratively with the administrators of

Rex to ensure that regional services continue beyond June 2025,

including looking at what support the (government) can provide,"

Prime Minister Anthony Albanese said in a statement.

The government is not a bidder in the upcoming sale process,

but it would explore a potential nationalisation should a sale

fall through, the statement added.

Albanese's centre-left Labor Party faces reelection in

nationwide polls that must be held by May.

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)