Several flights were canceled as regional airline Rex filed for bankruptcy after it halted trading on Monday.
The airline under Regional Express Holdings Limited has entered into voluntary administration.
Boeing's domestic fleet of 737s was grounded due to the disruption, while flights between major airports were cancelled.
Ernst & Young has been appointed voluntary administrator with Samuel Freeman, Justin Walsh and Adam Nikitins as the administrators.
Travellers with existing or cancelled flights will be given the opportunity to transfer their tickets to selected Virgin Australia flights, and eligible customers will be “re-accommodated” on Virgin flights “as close to the original departure time as possible”.
“In addition, Rex and Virgin Australia are exploring opportunities to support customers in the region, including with Virgin Australia selling Rex's regional services through codeshare or interline agreements and making Velocity Frequent Flyer benefits available to Rex's regional customers,” the EY statement said.
“On behalf of our affected Rex customers and regional communities, we would like to thank Virgin Australia for their support during this difficult time.”
Regional Saab 340 flights were “unaffected” by the crash.
“Prepaid ticket holders will continue to have their tickets honored by Rex Group on regional routes,” the EY statement said.
Sydney Airport CEO Scott Charlton said his thoughts were with the travellers and staff affected by the landslide.
“We are pleased to see that the caregivers will continue to operate regionally to and from Sydney during this time, as these services are vital to many regional communities,” he said.
He added that the collapse was evidence that changes were needed in the aviation market so that “competition could flourish” because “recent history suggests that the barriers are too high”.
“We have a rare opportunity to get this right with our proposed reforms to Sydney Airport’s slots and through the upcoming White Paper, and we remain ready to work with the Government to deliver on both,” he said.
Emeline Gaske, assistant general secretary of the Australian Service Union, said the move came at a “worrying time” for hundreds of workers, with the union prepared to work with management to “try to save as many jobs as possible” and ensure members’ rights were “protected”.
“What is particularly concerning is that Rex has been placed in close administration following the collapse of Bonza, another airline that served regional destinations,” she said.
“Regional air travel not only facilitates access to remote communities, but regional airlines also play a key role in providing quality local employment opportunities.”
Mrs Gaske urges government to prioritise regional air travel routes
“A lot of jobs depend on a thriving airline industry,” she said.
The collapse comes after widespread speculation that the airline was headed for bankruptcy, with some flight bookings suspended and a trading halt announced on Monday.
A Rex Airlines employee told The Australian that crew were also denied a stay at the company’s designated hotel at Brisbane Airport due to “unpaid bills”.
The prime minister said on Tuesday his government would consider “any proposal” to help Rex after the airline went into suspension on Monday, but criticised the carrier for operating flights outside the region.
Anthony Albanese told reporters in Sydney on Tuesday that Rex was a major airline that had received “unconditional, unconditional, huge support from the government”.
“One concern I have raised is Rex’s shift away from its traditional role as a regional airline to flying from Sydney to Melbourne,” Mr Albanese said.
“As a regional airline, Rex is essential in connecting communities in the region, particularly between the capital and regional communities, which are important for the local economy.”
The prime minister's comments come amid calls for his government to take action as Rex's future is at stake, and just months after its fledgling airline Bonza collapsed.
