Regional flights cost 173pc more per km than city routes, inquiry finds

The Productivity Commission has delivered a scathing report into the spiralling cost of regional air travel.

One submission revealed a family of four paid the equivalent of a single return trip to Europe for a one-hour flight.

The commission wants governments to stop propping up individual airlines and open subsidised routes to tender.

Regional Australians are paying excessive fares to travel within their own state, with a new Productivity Commission report exposing the extraordinary cost of domestic travel.

One family of four paid $3,200 for a one-hour flight from Kalgoorlie to Perth — the cost of a single return airfare to Europe.

The interim report, released today, found short regional flights were, on average, 173 per cent more expensive per kilometre than major city routes.

"Previous government inquiries have looked at the issue, but until now we haven't had the data or the evidence to understand what really sets the prices."

The report, commissioned by Federal Treasurer Jim Chalmers, comes as airlines continue to scrap regional routes across the country, due to high fuel costs and lack of demand.

The Determinants of Regional Airfares report received more than 100 submissions, with some revealing the devastating consequences of expensive airfares for families and remote communities.

The Northern Territory's Yalu Aboriginal Corporation warned high airfares were leaving children disconnected from their families.

"Expensive airfares mean that children in care are deprived of the opportunity to thrive and indeed will continue to suffer the effects of being disconnected from family, well into their adult years," the submission said.

Regional Development Australia Mid North Coast in NSW said a last-minute airfare could be beyond the reach of some families.

Its submission highlighted problems related to custody disputes, and warned the cost of flights could prevent parents from attending court hearings, mediation and supervised visits with their children.

Missed appointments could potentially lead to "adverse legal actions including removal of children from family care".

The report also included evidence from a remote resident unable to afford flights to take their daughter for a critical medical appointment, stating the Patient Assistance Transport Scheme (PATS) did not cover the costs.

"There are things my daughter is supposed to attend but because PATS don't cover it and it cannot be done up here, I just haven't taken her," the submission stated.

One Western Australian resident said even with a state government scheme limiting the cost of regional airfares, a return flight to Perth could still cost about $600.

The report found more than 90 per cent of regional and remote passengers flew with the Qantas Group or Virgin Australia in 2025, while 72 per cent of routes were served by just one carrier.

Regional flights also cost more to operate, with airlines spending about 91 cents of every dollar earned on operating costs, including fuel, maintenance and airport fees, according to the report.

"Half of regional and remote routes operate 10 or fewer flights per week and more than a third of their seats are empty," Commissioner Martin Stokie said.

"Operators are often choosing between charging higher fares or running them at a loss."

But profitability varied significantly between routes, the report said.

Mining routes were more profitable for airlines, while some short remote routes carrying fewer passengers had profit margins below 5 per cent.

Regional airline Rex went into administration in 2024, after expanding into capital city routes.

The airline was losing around $1 million a week and blamed high operating costs and difficulties competing with Qantas and Virgin when it collapsed.

Last month, Qantas and Virgin executives defended regional service cuts at a Senate inquiry into Australia's aviation sector.

Qantas Domestic CEO Markus Svensson told the committee regional flights were more expensive to operate because of fuel costs, aircraft requirements and airport fees.

"On a typical $197 fare, around $93 is made up by government, airport and security fees and charges and that's before the airline pays for aircraft, crew or fuel or maintenance," he said.

In its recommendations, the commission said governments needed to do more to help patients with the up-front costs of medical travel and subsidise essential routes where airlines cannot provide a commercial service.

"Government assistance should focus on keeping communities connected, rather than supporting particular airlines," Commissioner Catherine de Fontenay said.

The commission is seeking further submissions and registrations for public hearings and will deliver its final report in April 2027.