Qantas is set to benefit from the shake-up in the airline market
The news buoyed shares in Qantas, which could soon enjoy a 90% share of the domestic carrier market.
It will also come as a relief to the government which, set to call an election by the end of the year, is fearful of bad economic news,
A string of data out this week should provide further clues as to the state of the economy, which has so far managed to evade recession.
Qantas steps in
The Australian government asked Qantas to step in on Monday after Air New Zealand made clear it was considering getting rid of its Australian carrier, the country's second biggest airline.
Richard Branson's Virgin Blue is understood to be interested in some of the regional routes.
Other airlines may step forward, but many analysts see Qantas as the likely victor.
The carrier's shares jumped 16% to Aus $3.44.
"Expectation is that Qantas was going to get knock on benefits from reduced competition," Deutsche Bank's Bruce Hockman told the BBC's World Business Report.
"Qantas are already taking a preliminary look at Ansett and they really need to give an indication of whether they are prepared to be involved in the next 24 hours."
The move is the latest sign of intense competition in the Australian flights market, which has been hurt by soaring costs, weak regional currencies and discounting.
The government's anti-monopoly watchdogs have reluctantly given the go-ahead to negotiations.
Good times ahead?
With an election looming into view, the government continues to hope for good economic news.
"We had the Reserve Bank of Australia easing monetary policy last week, despite what is still a strong economic performance," Deutsche Bank economist Bruce Hockman said.
"It makes people a bit more confident about the domestic outlook."
Separately, a report on business conditions in Australia indicated that the nation's economy will continue to grow this year.
Alan Oster, chief economist at National Australia Bank, said the survey showed the domestic economy would continue to get stronger.
"Australia is basically performing better than most of the Organisation for Economic Cooperation and Development economies," Mr Oster said.
"We do not have any doubt that the local momentum will keep going until at least Christmas.
"The question becomes what happens next year if the world economy does not start to bottom out, particularly the US."