Australian Gov’t Inquiry to Probe Regional Aviation

By Andrew Curran.

The Australian Government has released the terms of reference for a Productivity Commission inquiry into regional airfares. The inquiry is in response to a 2024 Aviation White Paper finding concerning the cost, frequency and reliability of regional air services in Australia. 

Australia’s aviation network serves a large geographic area, and regional airports carry around 40% of all domestic passengers. However, given the smaller markets served, regional air routes usually have fewer airlines servicing them and less competition than routes between major cities. High ticket prices are another characteristic of regional aviation in Australia.

Exactly what constitutes regional aviation isn’t always clear, but it is generally accepted that flights between mainland capital cities such as Sydney (SYD), Melbourne (MEL), Brisbane (BNE), Canberra (CBR), Adelaide (ADL), and Perth (PER) are not regional aviation, whereas flights from these cities to the smaller capital cities of Darwin (DRW) and Hobart (HBA) are often considered regional.

Jet services to larger non-capital airports such as Cairns (CNS) and Gold Coast (OOL) are usually not considered regional whereas jet flights to smaller non-capital airports such as Launceston (LST) and Rockhampton (ROK) are frequently considered regional flights.

Flights operated by propeller aircraft are almost always considered regional flights, except for flights between Sydney and Canberra.

The government says for this inquiry, the term ‘regional’ encompasses passenger flights to or from areas outside Australia’s major cities (i.e. regional, rural and remote areas).

Sky high air fares a sore point for regional residents

Sky high air fare costs, especially from smaller towns to larger cities, are a long-running sore point for local residents. Airlines usually say this is because it costs more to fly smaller aircraft to often distant airports.

The 2024 Aviation White Paper found the average ticket price per kilometre was 52% higher for flights involving regional airports than for flights between two capital cities.

Additionally, according to the Australian Government, the number of regional routes fell from 458 to 291 between 1989 and 2021 and the number of remote routes fell from 264 to 163 in the same period. Many routes are now serviced by only one airline. This is despite overall growth in passenger numbers over the same period.

 

“In response to the Aviation White Paper, we tasked the Productivity Commission to look at regional airfares, including competition, pricing practices and whether profits along the supply chain are fair,” said Australian Government Transport Minister Catherine King this week.

 

 

“We know that safe, affordable and reliable air services are vital for regional and remote communities, not just for travel, but for access to healthcare, education and jobs.”

The terms of reference

Aside from trying to determine why regional air fares are so expensive, the Productivity Commission’s inquiry will make recommendations on policy settings to support a competitive, reliable, and affordable regional aviation network. The inquiry’s terms of reference include:

• Analysing the determinants of regional airfares and service offerings, and the composition of factors that contribute to differences between airfares available on regional routes and those available between major cities, including airport fees and charges;
• Identifying the main drivers of demand for regional air services;
• Examining any barriers to entry or expansion for airlines to provide regional services;
• Identifying policies and regulatory settings that may contribute to higher regional airfares, reduced service levels or reduced competition;
• Assessing the role of government and the most efficient forms of government intervention  in the market and other policies to improve access, pricing and service outcomes;
• Identifying the impacts of regional air fares and access to regular and reliable air services on regional economies (including tourism and migration), productivity, and improving Closing the Gap outcomes;
• Identifying the extent of competition between different air transport services (regular public air transport and charter) and with other modes of transport (road and rail), and the role of regional air freight in supporting the commercial viability of regional air services; and
• Considering international comparisons and best practices in comparable aviation markets.

The government says the inquiry can go beyond these terms of reference if it deems it necessary.

 

“In undertaking the inquiry, the Commission should consider all entities which affect regional aviation, including airlines, airports, aircraft maintenance, aircraft part suppliers, fuel suppliers, supply chains, regulators and any other entities which contribute to costs and other determinants of airfares,” says Australian Government Treasurer Jim Chalmers

 

The Productivity Commission has 18 months to complete its inquiry. It will hold a public consultation process, including holding public hearings, invite public submissions, and releasing a draft report to the public.

The government has also asked it to consult a broad range of stakeholders, including the Commonwealth, state, territory and local governments, airlines, airports, relevant aviation industry and tourism operators, regional communities and businesses.

Photo: Airlink.