A board meeting of international shareholders of Virgin Australia has signed off on the move to place the company into voluntary administration, The Australian newspaper reports.
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The late Monday night meeting came after the Morrison government rejected an appeal for a grant to keep Virgin afloat.
Up to 16,000 jobs could be at stake if the airline folds.
Virgin is carrying about $5 billion in debt and had sought federal help to keep operating but the Morrison government rejected a $1.4 billion bailout.
"They have some very big shareholders with deep pockets," Treasurer Josh Frydenberg said on Monday.
Virgin Australia is 90 per cent foreign-owned, with Singapore Airlines, Etihad Airways and Chinese conglomerates HNA Group and Hanshan owning 80 per cent between them, while Richard Branson's Virgin Group still owns 10 per cent.
Analysts say the federal government will have to ensure Qantas doesn't exploit any market monopoly left by Virgin's potential demise as investors wait to swoop.
The TWU said a crisis roundtable was held on Friday with Virgin chief executive Paul Scurrah and trade unions representing airport workers.
The meeting "heard a call for the federal government to take an equity stake in return for bailing out airlines," the union said.
Independent analyst Brendan Sobie from Sobie Aviation says it's crucial to maintain competition in the Australian market.
"That can be achieved through several different measures, it doesn't necessarily have to be achieved by a federal or state government taking over the airline," he told AAP on Monday.
"(Governments) just have to be supportive of whoever comes in, whoever the new investor is, and put in place the right policies and the right support to make sure that competition is maintained (by) whoever fills the void of Virgin Australia or whoever takes over Virgin Australia."
Mr Sobie said the federal government may have to temporarily step in.
"Australia has an open market but in an extraordinary situation, they could consider doing something to make sure ... if there's a monopoly on some routes Qantas doesn't abuse that," the analyst said.
"They could put in something like a fare cap."
The Australian airline market is still attractive over the long term, particularly the domestic segment.
"That's why you see all these investors waiting in the wings" to move on Virgin or finance a second airline, Mr Sobie said.
NSW engaged in a bidding war in an attempt to entice Virgin Australia south from Queensland even as it was reported the airline was heading into voluntary administration.
Queensland earlier on Monday declared it would "stop at nothing" to keep Virgin Australia headquartered in Brisbane.
NSW has announced it could offer a financial lifeline if the airline moved its base to the new Western Sydney Airport.
"We're thinking about what we can do to keep as many jobs going now, but also how we can actually start recovering the economy," NSW Premier Gladys Berejiklian told reporters on Monday.
"If that means encouraging businesses to set up shop in NSW, if it means bringing jobs to our state, we will, of course, consider all those things."
Queensland state development minister Cameron Dick issued a stern rebuke.
"NSW might want to bring a pea-shooter to the fight. We will bring a bazooka and we're not afraid to use it," he said.
"At a time when their jobs hang in the balance, the 1200 Queensland families who depend on those head office jobs should not have to face the threat of being forced to move to Sydney," he said when urging a national response.
Australian Associated Press
