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Passenger demand is continuing to grow on remote flights as connectivity shrinks, the ACCC has said.
The competition watchdog noted in its submission to the Productivity Commission’s inquiry into regional airfares that the number of passengers travelling on remote routes has increased by 13.3 per cent since 2019, while seat capacity has increased by 10.8 per cent.
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“However, this growth in demand has not translated into improved connectivity. The number of remote routes collectively serviced by the Qantas Group (Qantas and Jetstar), Rex and Virgin Australia has fallen materially, from 52 routes in January 2019 to 38 routes in January 2026,” the ACCC said.
“Of the 15 remote routes exited by the airlines over the period, Qantas dropped 11 routes, while Virgin Australia dropped 3 routes and Rex dropped 2 routes. The most affected region was Queensland, with 9 of the 15 dropped routes.
“These outcomes occur in the context of a highly concentrated domestic airline industry. The Qantas Group provides more than two-thirds of all domestic passenger services, and together with Virgin Australia accounts for over 95 per cent of the market.
“Competition is particularly limited in regional and remote markets, where around 60 per cent of regional routes and around 70 per cent of remote routes are serviced by a single airline group. This lack of competitive pressure has likely contributed to persistently high airfares and limited available services for many communities.”
The ACCC’s figures showed that there were 23 major city routes and 90 regional routes served by domestic carriers as of January 2026. The number of regional routes increased from 82 in January 2019 to 90 in January 2026, though 11 routes were dropped.
“The number of regional routes serviced has been quite volatile since 2020. The fluctuations post-pandemic can be attributed to the entry and exit of Bonza as well as other airlines (particularly Jetstar) testing out demand on new routes to regional locations,” the submission read.
According to the ACCC, while recent attempts at new entry – including Rex on capital city routes and Bonza to previously underserved destinations – “initially increased choice and placed downward pressure on fares”, their failures illustrated the difficult environment for newcomers.
“Both airlines faced structural and financial challenges that prevented sustained competition, underscoring the significant barriers to entry in thin regional markets,” the submission read.
“Ensuring Australians in regional and remote areas have access to safe, reliable and affordable air services requires a policy framework that supports effective competition where feasible, provides proportionate regulatory oversight of monopoly infrastructure, and recognises the essential nature of air connectivity for many communities.”
The watchdog noted as well that some regional markets may be less viable to sustain multiple carriers, a position also advanced by Virgin Australia in its submission.
“Competition and economies of scale on thinner regional and remote routes however can operate in tension,” the ACCC said.
“While the presence of more than one airline on a route can enable competitive pressure that may help constrain airfares, splitting a small passenger base across multiple operators can further reduce flight occupancy rates and increase per-passenger costs.”
Qantas Group operated 82 regional and 26 remote routes in January this year, compared to 26 regional routes and 11 remote routes for Virgin, and 18 regional and 13 remote routes for Rex.
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says:Whilst I understand the ACCC’s views/observations they are only looking at the situation from a “competition view point” The realities are that if passenger numbers in our regions were actually there, airlines would be jumping at the chance to operate an air service and make money, unfortunately that is not the case so airline ops become a major cost factor, no profit, no ops. I still maintain that third parties within regional airport operations are contributing to the problem by what maybe unreasonable or not needed costs to the airline so why are not all the parties involved getting together and having a chat about it. I am sure Tim Jordan would facilitate that for everyone’s benefit.