Scott Morrison says he won't stand in the way of a commercial solution to save Virgin from going broke because of coronavirus.
The prime minister has also suggested transport workers dip into their super to keep the airline afloat.
Critical domestic routes will be underwritten by the federal government in a bid to stop the aviation industry from collapsing because of the pandemic.
Two private firms are looking to buy Virgin Australia but the government will not bail out the company.
"There are all sorts of commercial discussions going on right now," Mr Morrison told 3AW radio on Friday.
"I'm not going to get in the way of a commercial resolution to this."
A private equity firm and an investment bank are reportedly considering purchasing Virgin.
Despite Virgin going into a trading halt again this week, the prime minister continued to shoot down suggestions the government should buy equity in the airline or provide a direct loan.
Mr Morrison says Australia's $3 trillion industry super funds, including the Transport Workers Union fund, had plenty of money.
"I'd like to see the industry and broader superannuation fund playing a more active role in dealing with the economic issues," he told the ABC.
Qantas and Virgin planes seen at Sydney airport. Source: AAP
The Commonwealth will underwrite a range of Qantas and Virgin flights, spending an initial $165 million to help sustain the Australian airlines.
The new arrangements will last for eight weeks with a government review set to determine if more support is needed.
Sydney Airport will also be allowed to park planes on one of if its unused runways, allowing it to store more grounded aircraft.
The east-west runway will be able to hold 50 planes.
Deputy Prime Minister Michael McCormack said the financial support was about ensuring secure and affordable access for passengers who need to travel - such as essential workers - and supporting the movement of crucial freight.
"We know that a strong domestic aviation network is critical to Australia's success," he said in a statement.
"This investment will also help Australians returning from overseas, who find themselves in a different city after 14 days of mandatory quarantine, complete their journey home safely."
The flights will service all state and territory capitals, as well as regional hubs across the country.
The announcement is well short of the $1.4 billion government bailout Virgin is hunting to stay alive.
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