The service between Canberra and Melbourne run by Rex Airlines is in doubt after the company went into voluntary liquidation.
The airline said its flights between smaller airports using the smaller Saab aircraft would continue but it said "flights between major airports have been cancelled, with the Rex Group's domestic fleet of Boeing 737 aircraft all grounded.
"Affected customers are being contacted directly by Rex".
That includes the Canberra-Melbourne service, the only one the airline operates from Canberra.
It ceased flying to and from Sydney after Sydney landing charges rose.
"We are disappointed to see Rex Airlines enter administration," Canberra Airport's head of aviation Michael Thomson said.
"Since starting services at Canberra Airport in 2021, Rex has been crucial in maintaining competitive airfares and providing valuable market competition."
Rex's statement implies very clearly that the Canberra route will now not run but the airport was hoping to get definite clarification later.
A statement by the administrators put Melbourne-Canberra as one of the "domestic routes being accommodated by Virgin Australia Melbourne".
A Canberra airport spokesperson said: "Virgin Australia is offering impacted Rex passengers with existing tickets the opportunity to transfer their tickets free of charge to overlapping Virgin Australia services. We urge passengers affected to visit the Virgin Australia website www.virginaustralia.com".
There were concerns within the industry that the grounding of Rex will decrease competition and so allow Qantas and Virgin Australia to raise fares.
"We hope for a positive resolution not only for the airline but also for the aviation industry as a whole," Canberra Airport's Mr Thomson said.
The Transport Workers Union said the federal government should buy a stake in the airline "to protect as many jobs as possible, entitlements for those facing redundancy, and to provide a voice for regional Australia".
"The TWU has slammed a vicious, hyper-competitive and unregulated market that has allowed an immoral Qantas to dominate at the expense of workers and the community," a union statement said.
"Just four weeks after Bonza went into liquidation, hundreds more aviation workers are facing stand downs, job losses and uncertainty," TWU National Secretary Michael Kaine said.
"It is absolutely critical that as many jobs as possible are protected through the continuation of regional flights, while entitlements are secured for those unable to retain employment. The TWU is in discussions with other aviation companies about job opportunities for Rex staff."
In the past, Rex has often accused Qantas of using its market dominance to undermine the ability of smaller airlines to compete.
Last year, it told a Senate committee that it was "obvious" that Qantas was putting on extra flights on some Rex routes and that this extra capacity "kills the ability for Rex to offer a sustainable alternative to the Qantas model for regional communities and increases Qantas's market power. When Rex is forced out of a route and Qantas is left with a monopoly, regional communities pay more".
