Industry experts and peak tourism bodies say the collapse of Rex Airlines means the system is broken, with tourism operators and customers ultimately paying the price.

Just months after budget regional airline Bonza went bust, this week Rex Airlines announced it was going into voluntary administration.

CQUniversity aviation expert Professor Doug Drury, who has worked in the industry for 40 years, said it is in "turmoil".

"Australia is a very large country, but with 26 million people and less than 20 to 30 per cent of them flying on a regular basis, it's very difficult to maintain a profitable organisation," Professor Drury said.

He said the cost would ultimately be placed onto consumers.

"Rex wanted to go and play on the routes that Qantas and Virgin have and complained to the ACCC several times about those airlines hoarding gates, time slots and routes.

"They [Qantas and Virgin] are trying to keep the door closed on the 737s."

Transport Workers' Union National Secretary Michael Kaine said the country's aviation sector was "broken" and called for government intervention.

"It is an industry in crisis … there's confusion and chaos," Mr Kaine said.

Former Australian Competition and Consumer Commission chair Rod Sims said Rex's failure was a public policy failure and the government, "sets this system up for failure, it sets this system up for a duopoly and therefore sets the system up for higher airline prices than Australians should be paying."

He points to the allocation of crucial slots at Sydney airport which are managed by a company that is majority-owned by Qantas and Virgin.

A Virgin Australia spokeswoman said the airline does not hoard slots and that Rex's administrator had "noted the airlines challenges were due to supply chain issues, load factors on its 737 capital city routes and access to pilots."

"We recognise the important role Rex plays in connecting rural and regional Australians. That is why we are exploring opportunities to support Rex's regional business through codeshare or interline arrangements," the spokeswoman said.

In a statement, a Qantas spokesman said Rex was "awarded the majority of additional peak slots it sought" during 2023 and that the Qantas Group was "still not back at pre-COVID levels of capacity across Sydney-Melbourne-Brisbane flights".

"The ACCC has been monitoring the domestic aviation market for the past four years, including investigating allegations made by Rex in 2021 of anti-competitive behaviour by Qantas, and has made no such findings," the statement said.

"Qantas and Jetstar haven't entered a new route that was operated by Rex for more than two years."

Regional tourism operators fear the worst

While Rex has continued to operate flights to regional centres this week, tourism operators have told the ABC the news of its administration had been a huge concern.

In Normanton, in western Queensland, Rex is the only airline operator.

Tourism operator Scott McGregor runs Railway Adventures, which flies dozens of tourists on Rex each month to Normanton and Mount Isa, where visitors spend a few days sightseeing, before boarding an outback train.

"We'd have to completely redesign our tours and that means places like Karumba and Normanton would miss out on our clients and that would be a great shame."

He said Rex's routes, which hop from one outback town to the next "like a mail run", was all part of the attraction for many tourists.

"It's just beautiful, it's like a joy flight and the people just love it," he said.

Yvonne Tunney runs a cafe and accommodation at the fishing village of Karumba, in north-west Queensland, and said the fallout from the loss of Rex in nearby Normanton would be "devastating".

"It's really unconscionable, business relies on it and it provides access for health and education services.

"Rex certainly plays a part in tourism access, particularly when it comes to promotion and marketing of this area by Rex, which many businesses and little areas can't afford to pay for."

White paper on aviation industry soon to be released

The federal government is expected to release its Aviation White Paper within weeks.

The paper aims to set long-term policies for the aviation industry, including recommendations on how to strengthen the sector and stronger measures to better protect the interests of consumers.

More than 300 public submissions were received on its preliminary document, the aviation green paper, including from the Australian Competition and Consumer Commission, and other advocates like Choice, who want an independent ombudsman to replace the existing Airline Customer Advocate.