By Lidia Kelly
MELBOURNE (Reuters) - The Australian government said on Sunday it will continue to underwrite domestic flights through September, extending its aid for airlines such as Qantas Airways Ltd (AX:QAN) and Virgin Australia Holdings Ltd's (AX:VAH) hurt by the COVID-19 pandemic.
Deputy Prime Minister and Transport Minister Michael McCormack said the initial backing, due to expire on Monday, will be extended to cover shortfalls in operating flights on top domestic routes, even as airlines start to rebuild crushed capacity.
Australia has barred its citizens from almost all outbound travel in order to stop the spread of the new coronavirus.
"The Australian government is doing everything possible to ensure the aviation industry is sustained throughout the pandemic so that it can rebound on the other side," McCormack said in a statement.
With border closures and social distancing since March, Australia has avoided the high infections and casualties of many nations, reporting 102 deaths and 7,255 infections so far.
Qantas has grounded 220 planes and halted all international flights, except government repatriation charters and cargo flights.
On Thursday, Qantas said it would triple domestic capacity to 15% of normal levels by the end of the month, with the potential to rise to 40% in July if state border restrictions ease.
Virgin became the country's first big coronavirus-related collapse, entering administration in April. It is for sale, and binding offers are due on Friday.
McCormack would not say how much the extended assistance would cost but said the government's backing for the industry has exceeded AUD1.2 billion (663.35 million pounds).
The government will also extend financial support for regional airlines to ensure regional continue to receive essential air services from Sept. 30 to Dec. 31, he said.