The Australian Government has thrown regional airlines and communities a $300 million lifeline to help them deal with the crippling impact of COVID-19.

Key points: The Government will provide $300 million to help regional airlines and communities

The Government will provide $300 million to help regional airlines and communities The package includes $100 million to underwrite some regional airlines

The package includes $100 million to underwrite some regional airlines Regional airlines have warned they cannot afford to operate under restrictions to prevent the spread of COVID-19

Regional aviation "has been smashed" by the global pandemic, according to Deputy Prime Minister Michael McCormack.

Speaking in Wagga Wagga, Mr McCormack committed $198 million over the next six months "to support the network" of regional airlines.

He said the funding would subsidise 138 regional communities that relied on aviation, with the grant guidelines expected to be released shortly.

The Government said "airlines, contracted aero-medical providers and a range of other essential service providers" would apply for this funding to be provided on a month-by-month basis until September 30.

There is also $100 million to underwrite regional aviation companies.

"We will work with the airlines on a case-by-case basis as to how we can best help them through this crisis," Mr McCormack said.

"We want as many people as possible to be able to keep their jobs in the aviation sector.

"In regional aviation alone there's 26,000 people employed in this sector."

Mr McCormack said there were about 12 commercial airlines, excluding Qantas and Virgin, that operated regular passenger services across regional Australia and he would continue to work with the sector.

Federal Labor welcomed the regional assistance package and called on the Government to do more.

"In working with regional airlines on individual support measures, the Government must include wage subsidies that ensure workers remain connected to their employer," Opposition spokeswoman Catherine King said.

The support follows a $715 million federal commitment less than two weeks ago to waive fees and taxes across the aviation sector.

Industry group Airlines for Australia and New Zealand welcomed today's funding announcement and described it as a necessary step in the industry's survival".

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Rex warns it cannot operate under COVID-19 restrictions

Regional airline Rex said earlier this week it would cease its passenger flights unless state and federal governments committed to underwrite its services.

The airline has been flying to 60 destinations across Australia, but it says it cannot afford to operate under the restrictions introduced to stop the spread of COVID-19.

It said it would continue its passenger flights through Queensland, where it was underwritten by the State Government.

Meanwhile, the Australian Competition and Consumer Commission granted Rex an exemption so it could coordinate flights with Virgin and Qantas on 10 regional routes, allowing the airlines to share revenue from the services during the pandemic.