Regional Express has confirmed it has been approached to expand its services and operate jet-powered flights between major Australian cities.
The airline said several parties had been interested in buying equity in the company to the estimated value of $200 million to fund an expansion.
On Tuesday, Rex shares were put into a trading halt before the company released a statement to the market on Wednesday morning.
"The Rex board is exploring the feasibility of this endeavour and has begun talks with potential equity partners to extend its operations to establish domestic operations, in addition to its regional services," the statement read.
"At this juncture the Rex board believes that with sufficient capital injection, there is a confluence of circumstances which render the start of domestic operations by Rex to be a particularly compelling proposition."
The company said a decision would be made within the next eight weeks and if the expansion goes ahead, services would be expected to begin in March 2021.
The Australian Financial Review reported earlier this week that Rex planned to sell more shares to pay for leases on 10 narrow-bodied jets such as Boeing 737s and Airbus A320s.
Regional Express deputy chairman John Sharp told The Australian Financial Review that the airline would also seek to hire new pilots, cabin crew and ground staff.
"We have been talking to half a dozen private equity and investment banking entities about investing in this new venture," he said.
"We are working with those parties and will narrow that down to one in the next three weeks or so."
The new planes would see Rex compete with Qantas, Jetstar and what remains of Virgin Australia on routes between Sydney, Melbourne, Brisbane, Adelaide and Perth.
Earlier this year the regional airline cut back services across its network due to coronavirus concerns and is relying on government financial aid.
It currently runs three flights from Sydney to Griffith and Narrandera airports.
In March, Griffith City Council waived landing fees at Griffith Airport from April 1 to help ensure Rex continued flying to the city.
Mayor John Dal Broi said an expansion by Rex could be positive for the city and hoped that when the full services returned, Griffith would retain six daily Rex flights.
"At the end of the day I can see the benefits provided when we return to normal we have our six flights a day," Councillor Dal Broi said.
Rex's current fleet is made up of prop-driven Saab 340 planes travelling to destinations in six Australian states.
Rex also runs the Australian Airline Academy based in Wagga.