The comments suggest Rex Regional was a sound business that ventured into a hostile territory which became the achilles heel of the organisation. The government is politically sensitive to supporting regional Australia. The solution is, don't bail Rex out with taxpayers' money, buy them out. The taxpayer will get the benefit from the acquisition of a established operation at a bargain price and services to regional Australia will be protected into the foreseeable future.
If anyone from the Departments of Industry and Finance is interested, please PM me for further details. I have a broadsheet business plan ready for assessment.
The role of government is not to go into business. So the taxpayer now has to buy the airline, then fund an entire fleet renewal, then tender against real commercial operators for intrastate government regulated routes or compete with QLink on other routes? What happens on routes where they compete with Jetstar and VA? Will they fly routes at a loss forever just to prop up a few country votes? Where does it end?