Rex went into voluntary administration in July after its fleet of Boeing 737s operating between major metropolitan centres was grounded.
The company's management was handed to administrators EY Australia, while its regional services continued as a buyer or financial lifeline was sought for the airline.
More than 600 workers were made redundant when it was revealed Rex had $500 million of debt. (Luis Ascui/AAP PHOTOS)
Transport Minister Catherine King and Workplace Minister Murray Watt announced on Tuesday the government would provide up to $80 million and grant early access to entitlements for Rex's former employees.
The money will support the continuation of critical services for regional communities, they said in a joint statement.
Rex's operations are considered vital for travelling medicos, regional tourism, as well as the attraction and retention of professional workers and their families.
There were fears for the future of Birdsville, in remote Queensland, if its twice-weekly flight to Brisbane was grounded, mayor Francis Murray said.
"Everything is connected back to it," Mr Murray told AAP.
"If we were without a flight now - and with unsealed roads out here - it would put us back 50 years.
"So to get this news is a massive relief."
Flights connecting Western Australia's vast regions to the city are essential, Albany mayor Greg Stocks said.
"For regional cities around Australia it's a lifeline," Mr Stocks said.
"We have people who fly to Perth for surgery, we have medical professionals who fly in because we don't have enough of them."
More than 600 Rex workers have been made redundant as it was revealed the airline was struggling with $500 million of debt.
In August, the federal government stepped in to guarantee bookings on regional flights, but resisted calls for a bailout.
The Transport Workers' Union urged the government to follow up its funding by taking a stake in the airline to protect jobs and shore up services.
"There are hundreds of jobs still on the line and there is a clear mandate here for the government to step in and safeguard critical aviation routes and protect those jobs," national assistant secretary Emily McMillan said.
Rex's administrators plan to apply to the Federal Court to extend the voluntary administration to June 30, 2025.
If the application is granted the government will continue to guarantee ticket sales made throughout the administration period to that date.
The administration process for Rex was progressing, the government said, as it noted the recent sale of its Pel Air Aviation business to Helicorp Pty Ltd, part of Toll Aviation.
The sale proceeds will be used to repay secured creditors.
