By Alasdair Pal

SYDNEY, Feb 11 (Reuters) - The Australian government said on Tuesday it would work with interested buyers of collapsed airline Regional Express Holdings REX.AX to ensure the airline's regional services continue, including a possible nationalisation should a sale fall through.

Rex entered voluntary administration last July, cutting hundreds of jobs and grounding its Boeing BA.N 737 flights between Australia's major cities, though it continues to operate smaller turboprop services to and from rural areas after the government guaranteed the routes until June this year.

It owes about A$500 million ($314 million) to 4,800 creditors after failing to compete effectively with rivals Qantas Airways QAN.AX and Virgin Australia IPO-VIR.AX, which together control 98% of the domestic aviation market.

"We are working collaboratively with the administrators of Rex to ensure that regional services continue beyond June 2025, including looking at what support the (government) can provide," Prime Minister Anthony Albanese said in a statement.

The government is not a bidder in the upcoming sale process, but it would explore a potential nationalisation should a sale fall through, the statement added.

Albanese's centre-left Labor Party faces reelection in nationwide polls that must be held by May.

The government has already provided a loan of up to A$80 million to keep Rex's regional routes operating until June and last month acquired A$50 million of debt from the airline's largest creditor.

($1 = 1.5939 Australian dollars)

(Reporting by Alasdair Pal in Sydney; Editing by Jamie Freed)

((Alasdair.Pal@thomsonreuters.com; +61 291 717 228; Reuters Messaging: alasdair.pal.reuters.com@reuters.net))