Are charges and regulatory hurdles barriers to more regional flights?

A file image of a Virgin Australia ATR 72 turboprop at Brisbane Airport. (Rob Finlayson)
A file image of a Virgin Australia ATR 72 turboprop at Brisbane Airport. (Rob Finlayson)

Virgin Australia says regulatory restrictions and high airport charges are roadblocks preventing more flights to regional communities.

In a submission to the Senate Rural and Regional Affairs and Transport Committee’s inquiry into the operation, regulation and funding of air route service delivery to rural, regional and remote communities, Virgin Australia said regional services were more challenging from an economic perspective compared with routes between capital cities, given the difficulties of achieving economies of scale.

“Virgin Australia is aware that some regional communities hold a perception that airlines are seeking to earn unreasonable returns in setting airfares on regional routes and/or that airfares on such routes are cross-subsidising pricing on trunk routes,” Virgin Australia said.

“As many of the regional routes we serve do not deliver acceptable commercial returns at current levels of pricing, this perception is inaccurate.

“As with all routes we serve, the sustainability of our regional services relies heavily on our ability to match the capacity we deploy with the demand for our flights, as well as the effective management of costs.”

The Virgin Australia submission noted the special arrangements for regional flights at the busy Sydney Airport, where a certain number of slots are dedicated to regional flights during the morning and afternoon peak.

It said these regulatory restrictions were preventing the expansion of services on regional routes with latent unmet demand.

The Virgin Australia submission said there were 42 fewer slot pairs available for regional services in 2017 between 0700-0900 and 1700-1900 in 2017, compared with 2001, a decline of 10 per cent.

“This has created a situation where the availability of slots at Sydney Airport for NSW regional services in the morning and afternoon peak periods is extremely limited,” Virgin Australia said.

“Timings in these periods are necessary for the operation of viable services by airlines, as they enable day trips to be undertaken by travellers originating both in Sydney and regional communities. Accordingly, the current legislative arrangements equate to less competition, fewer choices and potentially higher airfares on routes between Sydney and destinations in regional NSW until Western Sydney Airport becomes operational.”

Sydney Airport said in its submission to the inquiry 28 per cent of slots in the morning peak between 0600 and 1100 and 35 per cent of slots in the evening peak between 1500 and 2000 at Sydney Airport were allocated to regional services.

However, it said although the “Permanent Regional Services Series” slots, also known as a “regional ring fence”, was designed to support regional aviation, it had the unintended impact of disincentivising airlines to operate regional services.

This was because while a domestic airline was able to move from operating an interstate flight to a regional flight, once it did so it was unable to move to once again use that slot to operate an interstate route.

“Therefore, a disincentive exists to use the slot to operate the regional service in the first place, as doing so limits the airline’s ability at a later point in time to use that slot in line with demand and where they will achieve a commercial return,” Sydney Airport said.

Qantas described regional aviation in Australia as “operationally and commercially difficult” in its submission to the inquiry, given the inelastic demand profiles of many regional markets due to low populations and limited tourism appeal, as well as the high costs associated with flying to regional airports.

It told the committee passenger service charges were on average $16 per passenger for airports in New South Wales, South Australia, Tasmania and Victoria, compared with $25 in the Northern Territory, Queensland and Western Australia.

Moreover, 13 of top 15 most expensive airports in Australia that Qantas flew to were in WA and Queensland.

Qantas says regional aviation in Australia is “operationally and commercially difficult”. (Brian Wilkes)

“Airports continue to exercise monopolistic power over airport charges and, contrary to some commentary, this has a direct impact on the price of travel for consumers and challenges the commercial viability of regional air services,” Qantas said.

“Regional airports – particularly in regional Queensland and Western Australia – are by far the most expensive in the group’s network, charging significantly more than their capital city equivalents.”

“Whilst airfares in regional Australia may be higher than between major population centres, due to the confluence of supply and demand challenges, these services are not significant profit centres for the group.”

The peak industry body Airlines for Australia and New Zealand (A4ANZ) said airport charges represented a “significant proportion of airfares”, particularly on regional and rural routes.

The A4ANZ submission said Australian airports collected more revenue per passenger and generated significantly higher profits than their international benchmarks.

“In some cases the charges add more than 30 per cent to the base ticket price,” A4ANZ said.

“Indeed, one of biggest roadblocks to the airlines’ ability to introduce new and grow existing routes is high airport charges.

“Greater oversight by government to encourage and, where required, force constructive, commercial engagement is needed to minimise the negative impact of the airports’ monopoly powers.

“The threat of regulation would result in a genuine commercial negotiation, greater investment by airlines and improved efficiency in the allocation of resources.”

Airport charges represent a “significant proportion of airfares”. (Dave Parer)

Sydney Airport said aeronautical charges paid by regional airlines at Sydney Airport had not increased since 2001.

“Therefore, over the 16 years to 2017, regional aeronautical charges at Sydney Airport have fallen in real terms by 49 per cent,” Sydney Airport said.

“Therefore, any increases to airfares on regional routes cannot be attributed to Sydney Airport charges.”

Australia’s two major airline groups also reiterated their opposition to giving foreign airlines the right to operate domestic routes – aviation cabotage – arguing it would do nothing to boost air services to regional communities.

The issue of aviation cabotage has been raised a number of times in recent years, including in 2015 when the federal government considered opening up some domestic routes in northern Australia for foreign carriers.

The government’s 2015 Competition Policy Review, led by Professor Ian Harper, recommended removing cabotage restrictions for “all air cargo as well as passenger services to specific geographic areas, such as island territories and on poorly served routes”.

Then, as now, it was opposed by Qantas and Virgin Australia.

Qantas said aviation cabotage would “destabilise Australia’s aviation market with far-reaching impacts on the commercial and operational viability of Australia’s aviation network”.

“The group is opposed to aviation cabotage in all circumstances,” Qantas said.

“The group bases its strong opposition to aviation cabotage on the significant adverse consequences for Australia’s workforce and broader economic interests.

“There is no data or credible evidence demonstrating aviation market failure on regional routes that warrants moves towards cabotage.

“The presence of carriers operating on Foreign Air Operator Certificates would lead to a reversal of current safety arrangements applicable to domestic aviation. The domestic travelling public could not be assured the same high safety standards as foreign airlines operate under foreign safety regimes.”

Virgin Australia said removing cabotage restrictions would have “far-reaching consequences for the long-term sustainability of the Australian aviation and tourism industries”.

Further, the airline said cabotage represented “an opportunistic play for foreign carriers without a long-term commitment”.

“Operating alongside Australian airlines, foreign carriers would earn marginal revenue by offering capacity that could be priced at levels lower than the average cost faced by domestic airlines on these sectors,” Virgin Australia said.

“Over time, this could be expected to lead to network rationalisation by local operators, with aircraft redeployed to higher-yielding routes.

“This would come at a cost to tourism in regional areas, as domestic airlines play a key role in terms of investment in marketing and promotional activity.”


  1. says

    Government should take strong steps against airlines who are not working for the welfare of people, because people pay fairs what the airlines company told them to pay.

  2. Daryl says

    The Wagga (NSW) council recently attempted to raise landing charges significantly for the Forrest Hill facility (also a RAAF base).I suspect this is the case with other regional centres,and not an airline initiative.They just pass the charges onto the mug traveller.

  3. Craigy says

    @ Saad, Your comment doesn’t make any sense. Airlines are businesses. They have to make a profit to stay in business therefore they charge airfares that cover the cost of providing the service and that included airport charges.

  4. David says

    One of the problems could be that the local councils have to maintain the airport in a certain condition for the aircraft to be allowed to land their. This all costs money, and in some cases there may be less than seven scheduled flights over the course of a week. The high airport costs need to be passed on to the airline who uses the airport, who in turn passes on the cost to the passenger.

  5. Daryl says

    Wonder what the RAAF contribute to joint facilities like here(Wagga).The private owners recreational flyers were the ones up in arms about the proposal.

  6. James says

    @ David.

    Utter rubbish in some cases!!!! I’ve done a lot of flying down the east coast for work (my first commercial pilot job) and I’ve watched some of the local airports run by local councils.

    To summarise; mostly run by people who have no bloody clue about aviation, massive chips on their shoulders for unknown reasons and seemingly a cast of thousands to run very small regional Aerodromes. I firmly believe that some of these places could be run more efficiently and with far less costs being transferred to passengers.

    Also, they way they treat GA is a disgrace. Parking, hanger, landing are some of the ludicrous fees that are charged.

    If a few certain councils didn’t decide to upgrade their runways (“so we can get FIFO work or the Q400”) I’m sure costs could level out.
    Give them back to the feds!!

  7. Freddie says

    The people in Regional places really do suffer with very large fares to be paid and there is never a sale on them which benefits the people. It doesn’t make any sense as the regional airports do not experience the volume of traffic – therefor less wear and tear on landing strip and apron areas. The staff usually roar out from town to be able to check passengers in and unload and load the aircraft. Probably three hours of intense madness and then nothing. I realise that maintenance has to be done but really….? The cost to fly to these places is prohibitive……

  8. Ken McCracken says

    Many country towns have a rich history which could attract the tourist dollar. Maybe more could be done by local councils and others who have a vested interest to develop tourist packages which include access by combined air/bus at an attractive cost. Apart from the tourist, the obvious beneficiaries would be those businesses which provide services to tourists, retail, local employees and new job seekers. The number crunchers could work out if and how the air operators could be subsidised to make it feasible.

  9. Peter Ritty says

    Stop complaing all of you. We are lucky to have major airlines serving regional centres. Think of costs relating to same, Charges by greedy councils etc. I’d rather,as I do fly with a reputable airline than a come and go tomorrow carrier.
    Work the maths and understand. I fly to many regional destos and I love to see the flying kangaroo on the undercarriage. GO QF .Ask the people of MRZ who were so grateful when Brindabela went down and QF began operating again. Blame the government of the day.

  10. David says

    Poor QANTAS having to pay $25 per pax at a regional Airport.
    I don’t know what Wellcamp charges (its not likely to be cheap) but even if its $50 per pax taking $50 of the actual price for YSSY YBWW still leaves a very expensive fare for those that don’t manage to get one of the few headline discount tickets.

  11. Freddie says

    Most of us assume that people fly/travel for recreation or other things. Some people have to travel from regional destinations for medical reasons – and back, if they are lucky – in one day. There is no subsidy for these fares and it make a huge difference as to how well they live for the following weeks. This was the case for a relative of mine. At times like this the travel by air is so necessary and the realisation is that it is profoundly expensive – hits you like a brick.

  12. AlanH says

    A halfway decent high-speed rail system then for Australia perhaps? Instead of the ludicrous 19th-early 20th century system we are now lumbered with. Better tracks and infrastructure and a greatly expanded network to more destinations.

    I know what am I saying is probably heretical in an aviation forum!