The deputy prime minister has welcomed news private firms are looking to buy Virgin airlines as it struggles during the economic fallout of COVID-19.

It comes as the federal government moves to underwrite critical domestic routes as Australian airlines suffer from huge drops in business.

Michael McCormack also said aviation sector employers dipping into their own super to bail out Virgin was an option.

“We want to see a market resolution for this and if Virgin can’t raise the capital through its shareholders … then let’s see what happens,” he told ABC on Friday.

“We want to see two airlines out the back of the COVID-19 and I think we can and we will.”

A private equity firm and an investment bank are considering purchasing Virgin, the Australian Financial Review reported on Friday.

Virgin went into a trading halt this week and Mr McCormack continued to shoot down suggestions the government should buy the airline to save it.

The commonwealth will underwrite a range of Qantas and Virgin flights, spending an initial $165 million to help sustain the Australian airlines, it announced Thursday.

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 if its unused runways, allowing it to store more grounded aircraft, Mr McCormack announced on Friday.

The east-west runway will be able to hold 50 planes.

Mr 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 and today’s announcement demonstrates our commitment, yet again, to maintaining connectivity during this pandemic,” he said in a statement on Thursday night.

“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, along with Albury, Alice Springs, Coffs Harbour, Dubbo, Kalgoorlie, Mildura, Port Lincoln, Rockhampton, Tamworth, Townsville and Wagga Wagga.

The announcement is well short of the $1.4 billion government bailout Virgin is hunting to stay alive.

Treasurer Josh Frydenberg is instead putting pressure on the company’s shareholders, saying they have “deep pockets”.

“We want to see Virgin continue, we want to see two airlines in the domestic market, but we’re not in the business of owning an airline,” Mr Frydenberg told ABC radio on Thursday.

Mr Frydenberg said the government was continuing to talk to the company as well as Qantas, having already provided more than $1 billion in relief for the aviation industry.

Virgin on Thursday announced a further seven-day trading halt for its shares to continue talks on financial aid and restructuring alternatives to help it weather the crisis.

The airline didn’t identify who the talks are with.