Regional flyers pay double per kilometre, and the Productivity Commission says the airlines are not mostly to blame

For people in regional Australia who have long suspected the airlines of gouging them, the Productivity Commission has delivered an awkward answer: mostly, it is the maths of small planes and small towns.

Its interim report into regional airfares, released on Wednesday, 11 November, found fares on regional and remote routes were on average 13 per cent higher per kilometre than on major city routes between 2023 and 2025. On short regional and short remote routes, the gap was far wider: more than double per kilometre.

“Many regional communities are frustrated by the high cost of flights,” Commissioner Catherine de Fontenay said. For the first time, she said, the commission had been given access to confidential cost and revenue data from the airlines.

So why are the fares so high?

Because the flights cost more to run, Commissioner Martin Stokie said. About 91 cents in every dollar of an average regional fare goes on operating costs: fuel, maintenance, airport fees and the rest. Average profit margins of about 9 per cent are broadly comparable with city routes, though they vary widely. Mining routes earn significantly more; some short remote routes with few passengers earn under 5 per cent, which the commission says threatens whether they can keep flying at all.

Half of regional and remote routes run 10 or fewer flights a week, and more than a third of their seats fly empty, Mr Stokie said. Operators, he said, are often choosing between charging higher fares or running at a loss.

Is there enough competition?

Not much. More than 90 per cent of regional and remote passengers flew with the Qantas Group or Virgin Australia in 2025, and 72 per cent of routes were served by only one airline. On larger routes, the commission found, newcomers face the incumbents’ scale, networks, corporate travel deals and brand loyalty.

What does it mean for a family?

Submissions to the inquiry, more than 100 of them, put human numbers on the averages. One described a one-hour flight between Kalgoorlie and Perth costing a family of four $3,200, about the price of a return ticket to Europe. Another WA resident said that even with the state’s capped-fare scheme, a return trip to Perth could still cost about $600. A Northern Territory Aboriginal corporation said high fares leave children in care cut off from family.

That is the cost the report is trying to address: not the price of a holiday, but whether a patient can reach a specialist or a parent can get to a court date.

Who should pay?

The commission’s draft view is that governments should stop handing ongoing assistance to individual carriers, such as the support given to Rex after it went into administration in 2024, and instead remove barriers to competition. Where support is needed, it should follow transparent criteria and target the people and communities that most depend on flying.

It recommends strengthening patient travel assistance schemes, including who is eligible and how much is covered, and cutting the upfront costs patients face. On airports, it wants a system-wide approach to funding rather than case-by-case rescues.

“Government assistance should focus on keeping communities connected, rather than supporting particular airlines,” Ms de Fontenay said.

Why now?

Regional networks are thinning. Over 2026, routes from Mount Gambier to Adelaide, Coffs Harbour to Melbourne and Alice Springs to Melbourne, among others, have been suspended or cut as airlines cite fuel costs and weak demand. Rex remains under pressure. The 2024 Aviation White Paper put the per-kilometre premium for regional fares over capital-city flights at about 52 per cent; the commission’s data now shows how much that premium swings from route to route.

The inquiry was commissioned by Treasurer Jim Chalmers.