Regional Express airlines will continue to service the Adelaide to Kangaroo Island route until the Regional Airline Network Support program ends.
When the federal government's RANS program ends on December 31, Rex will cease all services to the Island, a spokesperson for the airline said.
Rex is operating one return service on Tuesday and Thursday in accordance with the two-return services being supported by the RANS program.
Rex in February announced it was going to withdraw service from Kangaroo Island and other regional airports on June 30, alleging unfair competition from Qantas.
QantasLink at the time said it would step up and expand its schedule to replace Rex flights.
Then the COVID-19 pandemic hit and now Rex and Qantaslink are flying alternate days to Kangaroo Island using the government program funds.
Regional Express (Rex) meanwhile this week announced it was progressing with plans to expand its network to include flights between capital cities, taking on Qantas and a restructured Virgin Australia, in so-called "domestic operations".
The Rex board has approved an initiative to raise a minimum of $30 million for the expansion.
"Due to the strong interest shown by various external parties to participate in the fund raising, including lessors willing to provide AUD$30 Million for 15 of Rex's fleet of 60 unencumbered Saab 340 aircraft, the board has now formed the view that funding will be forthcoming for the minimum target sought," reads the statement from Rex.
"Consequently the board has authorised management to commence preparations in earnest for the operation of an initial fleet of five to ten narrow- body jet aircraft to be based out of Sydney and/or Melbourne to service the golden triangle (Sydney-Melbourne-Brisbane).
"The Board has confirmed March 1, 2021 as the targeted start date for domestic operations, subject to fund availability and regulatory approval.
"Rex has also confirmed the execution of a non-binding Memorandum of Understanding with Avions De Transport Regional (ATR), the world's largest manufacturer of turboprop aircraft, for a range of potential commercial co-operation that would complement Rex's domestic operations."
Rex deputy chairman John Sharp said, "With Rex's expansive regional network of 60 destinations, existing infrastructure in all these capital city airports, superior efficiencies and unbeatable reliability, it will simply be an incremental extension for Rex to embark on domestic operations especially since one out of every 10 flights in Australia was already a Rex flight during the pre-COVID days.
"Leveraging on Rex's existing infrastructure and overheads, our cost base for the domestic operation is estimated to be at least 35 per cent below Virgin's Australia's (pre-COVID) with 50 per cent lower additional headcount needed proportionately.
"Rex's domestic operations will be priced at affordable levels but will also include baggage allowance, meals on board and pre-assigned seating.
"Booking channels will include both Rex direct and Global Distribution Systems (GDS). Lounge membership will be available for subscription. It will be a hybrid model that Rex has so successfully pioneered over the last two decades for its regional operations."
Regional Express (Rex) says it is Australia's largest independent regional airline operating a fleet of 60 Saab 340 aircraft (pre-COVID) on some 1500 weekly flights to 60 destinations throughout all states in Australia. In addition to the regional airline Rex, the Rex Group comprises wholly owned subsidiaries Pel-Air Aviation (air freight, aeromedical and charter operator) and the two pilot academies Australian Airline Pilot Academy in Wagga Wagga and Ballarat.