The competition watchdog has proposed letting Regional Express continue to coordinate flights on 10 regional routes with Qantas and Virgin Australia for another 11 months in response to the COVID-19 pandemic.
The Australian Competition and Consumer Commisson's draft determination would extend an interim authorisation granted in March through to 30 June 2021.
"The ACCC recognises that airlines are still facing significant challenges, including exceptionally low demand, due to the ongoing impacts of the COVID-19 pandemic," ACCC deputy chairman Mick Keogh said on Thursday.
"Allowing the airlines to coordinate in this way will contribute to the ongoing provision of services for passengers flying on these 10 regional routes."
The authorisation would allow each carrier on a route operating one daily service and sharing revenue, or an operator suspending operation on a route to allow a different carrier to maintain a viable service.
Mr Keogh said that while such coordination would normally raise competition concerns, given the extraordinary circumstances of the pandemic it was in the public interest.
The arrangement is conditional on airlines not raising fares higher than those in place as of February 1.
The ACCC is seeking public comment and will then make a final determination on the proposal.