It's not yet clear how creditors - including taxpayers - will fare under a Rex Airlines takeover by American aviation company Air T.
However, an administrators report ahead of the likely sale makes plain there were more reasons than a botched entry into the capital city market for the regional airline's insolvency.
A global pilots shortage and supply chain issues have been blamed for Rex's nosedive in mid-2024, when the airline was declared insolvent.
The inability to find sufficiently trained pilots or find engine maintenance components were listed in EY's voluntary administrators report, released on Tuesday, as key factors behind the company's failure.
It also found the move to compete with Qantas, Virgin and Jetstar with jet aircraft fell flat given an "inability to secure frequency" on Australia's highly competitive routes.
The capital-to-capital routes have been disbanded and are not part of Air T's plans.
The EY report gives several options for how creditors may be treated, dependent on whether the takeover goes ahead, or liquidation takes place.
"The administrators understand the debt to the Commonwealth will be restructured immediately upon (the takeover)," the report reads.
If the takeover does not take place, the government is first in line to be repaid and "there is no estimated return to ordinary unsecured creditor or contingent creditors".
In that scenario, Rex Airlines assets will be sold with proceeds going to the Commonwealth, with proceeds expected to be "insufficient to discharge the (government) debt in full".
It estimates the federal government will receive 35-63 cents in the dollar, where as priority employee creditors will get 10 per cent of their owings.
Canberra has provided at least $130 million to support Rex: $80m from a commercial loan offered in November 2024 to maintain regional services, and $50 million in offloaded debt it assumed in January.
