Even though people flying on regional and remote routes around Australia are paying higher airfares than those taking city routes, the viability of some of these routes could be at risk.
New analysis has found regional and remote airfares were 11 per cent higher per customer and equivalent to 13 per cent more per kilometre compared to routes connecting major cities, between 2023-2025.
The Productivity Commission has analysed cost and revenue data from airlines for the first time, finding that on some routes, such as short regional and short remote routes, the fare per kilometre was more than double that of city routes.
Many regional and remote routes carry less than 15,000 passengers a year. Around ten flights or fewer each week take off with at least a third of the seats empty, on average.
Competition is also lower, with 90 per cent of passengers using Qantas Group or Virgin Australia.
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Meanwhile high costs and a lack of competition have raised concerns about the future viability of these services.
According to the Commission's analysis, 91 per cent of regional airfares can be attributed to operating costs. It says the remaining profit margin of nine per cent is broadly comparable to most major city routes.
But on some routes, the profit margins are much higher. Mining routes on average are closer to 20 per cent or more.
"When operators have to spread the costs of running flights across a small number of passengers, they’re often choosing between charging higher fares or running them at a loss," Commissioner Martin Stokie said.
The Productivity Commission is set to deliver a final report to the government next year, with guidance on how best to support a competitive, reliable and affordable aviation network outside major cities.
Regional and remote communities can be disproportionately affected, as access to health services, economic opportunities, and connections outside their communities relies on air travel.
Despite potentially limited capacity to pay higher fares, they often have minimal access to alternative transportation options.
"The challenges facing a remote island community are very different to those facing a large regional tourism destination or a mining centre," Commissioner Catherine de Fontenay said.
The Productivity Commission said that since higher fares reflect the higher costs operators incur, any support should target people in regional and remote communities trying to access key services.
Short regional and remote routes have been identified as particularly at risk as costs rise, often only being served by a single airline.
Many of these routes earn a profit margin of less than 5 per cent, making them vulnerable to increases in costs or reduced demand, the report states.
The operating environment is "challenging" for regional airports, the report found, with many operating at a loss or reliant on government support.
Council-owned airports and aerodromes have an estimated replacement cost of approximately $4 billion, while meeting government regulation was said to increase costs for some operators.
The Commission said any government intervention should focus on connectivity, particularly for remote areas and islands.
"We spoke to people in communities all around Australia who told us how important air travel is for them," Commissioner de Fontenay said.
