UPDATE: The Albanese government has just announced a crucial inquiry into soaring regional airfares affecting Australians. Treasurer Jim Chalmers revealed the terms of reference for a comprehensive investigation by the Productivity Commission aimed at addressing the alarming drop in regional flight routes and rising ticket prices.
This inquiry comes as regional Australians face a drastic reduction in air travel options, with the number of regional routes plummeting from 458 in 1989 to just 291 in 2021. The urgency of this situation cannot be overstated, as recent reports indicate that regional flights are now, on average, 52% more expensive per kilometer than flights between major cities.
Chalmers emphasized that the review is critical for restoring “reliable air services at reasonable prices.” He stated, “We tasked the Productivity Commission to look at regional airfares, including competition, pricing practices, and whether profits along the supply chain are fair.” The findings will provide essential data for both state and federal governments, enabling them to tackle the issue effectively.
The inquiry is expected to last approximately 18 months and will include public hearings focused solely on regional services. This means that the overarching issues of domestic aviation competition, particularly the dominance of Virgin Australia and Qantas, which control 99% of the market for major city flights, will not be addressed in this report.
In parallel, a separate inquiry into airport charges is anticipated, as regional airlines struggle against escalating fees that hinder their competitive ability. Rex Airlines, a regional carrier, has faced significant operational challenges, leading to the government investing over $130 million to support its survival after its collapse into administration in July 2024.
Critics argue that government assistance has distorted the competitive landscape, with some suggesting that redistributing Rex’s routes among other airlines would enhance competition. Currently, about half of Rex’s routes lack service from any other airline, with most routes backed by state governments, which provides some financial insulation for the airline.
Meanwhile, the acquisition of Rex by Air T, a Nasdaq-listed company, is expected to be finalized by December 5, coinciding with the conclusion of Rex’s administration period. While the details of the deal remain undisclosed, sources indicate that Air T is negotiating a profit-sharing arrangement with the government to ensure taxpayer interests are protected.
Industry analysts are skeptical about Air T’s capacity to sustain investments in Rex, especially given its aging fleet of Saab 340 aircraft. In its first public statements, Air T pledged to revitalize the fleet and maintain operations for the coming 10 to 15 years. The company stated, “We recognize the essential role that Rex plays in connecting regional Australian communities.”
This inquiry and the developments surrounding Rex Airlines underscore the urgent need for a sustainable approach to regional air travel in Australia. As the inquiry unfolds, the eyes of regional Australians will be watching closely for solutions that ensure both affordability and accessibility in air travel.
Stay tuned for further updates as this situation develops.
