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Who will fly to the help of Qantas?

Australia's government is expected to come to the aid of Qantas, but what form that assistance takes may depend on the scale of the woes the struggling flag carrier reveals in its earnings this week.

Qantas has warned that it will unveil a first-half loss of up to A$300 million ($270 million) when it reports earnings this Thursday, while Australian media on Tuesday reported that the airline was planning to cut up to 5,000 jobs and sell off some of its assets.

(Read more: Has the tide turned for corporate Australia?)

"How bad are things at Qantas? That's what this Thursday will bring and then you'll have a really clear picture of what the Australian government will do and whether more drastic measures are needed," said Evan Lucas, a market strategist at trading firm IG, in Melbourne.

Australia's government said on Tuesday it was looking at ways to help Qantas and analysts say it has three options: An outright bailout, repealing the Qantas Sales Act which essentially prohibits foreign ownership of the airline and a state-backed loan.

The government has expressed reluctance to offer cash handouts to struggling corporates, while the Labor Party and Green Party, which hold the balance of power in the Senate, Australia's upper house of parliament, have said they would block any legislation that makes changes to the Qantas Sales Act.

That leaves a state debt guarantee, which analysts say is the most likely outcome.

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"The government could go down a number of paths, they could decide to guarantee Qantas borrowing and push for a repeal of the Qantas Sales Act later on," said Shane Oliver, head of investment strategy and chief economist at AMP Capital in Sydney.

Whether to help Qantas has proved a contentious issue in Australia, which in recent months has seen Japan's Toyota and Holden, a subsidiary of General Motors, unveil plans to pull out of Australia at the cost of thousands of job losses.

(Read more: Cracks appear in tough line on Aussie corporate handouts)

"A debt guarantee will have no immediate costs, although if the airline fails it could potentially land the government with a gigantic ($5 billion-plus) snowballed debt in a couple of years' time," investing firm The Motley Fool said last week. "It is in the government's best interests to steer away from both options (a debt guarantee or financial aid).

In a newspaper ad this month, Qantas rival and Virgin boss Richard Branson urged the government not to provide financial aid to the flag carrier. Australian Treasurer Joe Hockey meanwhile has referred to being "dragged kicking and screaming" on the issue of state assistance to Qantas.

Qantas says that Virgin Australia has access to foreign funding through major shareholders Gulf carrier Etihad, Singapore Airlines and Air New Zealand and that puts it at a disadvantage.

Qantas shares, which hit a low around of A$0.95 after December's profit warning, have recovered almost 30 percent of their value – reflecting expectations for state assistance.

(Read more: Qantas shares slump 17% on profit warning)

Even with assistance, analysts say Qantas has a long way to go before it is out of the woods.

"Would I change my view of the Australian economy if Qantas went bust? Probably not but would I feel a little sad," said AMP's Oliver.

Writing by CNBC's Dhara Ranasinghe. Follow her on Twitter at @DharaCNBC

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