Productivity Commission Inquiry Finds Regional Airfares Cost 173 Percent More Per Kilometre

An interim report by the Productivity Commission has revealed that regional air travel in Australia costs an average of 173 per cent more per kilometre than major city routes. Commissioned by Federal Treasurer Jim Chalmers, the "Determinants of Regional Airfares" report analyzed data from more than 100 submissions, exposing the severe financial burden regional flights place on remote residents and families.

The findings highlighted instances of extreme pricing, including a family of four paying $3,200 for a one-hour flight from Kalgoorlie to Perth, equivalent to the price of a return ticket to Europe. Another Western Australian resident noted that even under a state government cap scheme, a return flight to Perth still costs roughly $600. The report comes amid ongoing reductions in regional services as airlines grapple with high fuel costs and low passenger demand.

COMMUNITY IMPACTS AND ACCESS ISSUES

Submissions detailed significant social and legal consequences resulting from high air travel costs. The Yalu Aboriginal Corporation in the Northern Territory reported that exorbitant fares leave children in care disconnected from their families. Regional Development Australia Mid North Coast in New South Wales warned that last-minute airfare costs prevent some parents from attending court hearings, mediation, or supervised visits, potentially leading to adverse legal outcomes such as the removal of children from family care. Additionally, a remote resident disclosed missing critical medical appointments for their daughter because the Patient Assistance Transport Scheme (PATS) failed to cover the expenses.

MARKET CONCENTRATION AND OPERATING COSTS

The inquiry revealed a high level of market concentration, with the Qantas Group and Virgin Australia carrying more than 90 per cent of regional and remote passengers in 2025. Furthermore, 72 per cent of regional routes were served by only a single carrier. Operating costs remain high for regional services, with airlines spending approximately 91 cents of every dollar earned on fuel, maintenance, and airport fees.

Commissioner Martin Stokie stated that half of regional and remote routes run 10 or fewer flights per week, leaving over a third of seats empty, forcing operators to choose between higher fares or running at a loss. Profitability varies significantly across routes; mining corridors remain more profitable, whereas some low-capacity remote routes yield profit margins under 5 per cent. The report noted that regional carrier Rex entered administration in 2024 after expanding into major city routes, incurring losses of approximately $1 million per week due to high operational costs and competition.

In defense of high regional fares, Qantas Domestic CEO Markus Svensson recently told a Senate inquiry that on a typical $197 fare, about $93 goes toward government, airport, and security fees before factoring in aircraft, crew, fuel, or maintenance expenses.

COMMISSION RECOMMENDATIONS

The Productivity Commission recommended that governments transition from propping up specific airlines to opening subsidised routes to competitive tender. Commissioner Catherine de Fontenay emphasized that government assistance should prioritize community connectivity rather than direct support for individual carriers. The commission also urged governments to provide better upfront financial assistance for medical travel. Further public submissions and hearings are being accepted ahead of the final report's release in April 2027.