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Qantas says it is making only a 5 per cent profit margin on its QantasLink Q400 regional turboprop services due to high costs.
In its submission to the Productivity Commission’s inquiry into regional airfares, the Flying Kangaroo said regional aviation is “commercially challenging”, with airport charges, distance, fuel costs and maintenance all impacting its bottom line.
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“While Qantas’ Q400 turboprop fleet is the most suitable aircraft to service the long and thinner remote or smaller regional routes, on average, these services are more than twice as expensive to operate than Qantas 737s and about three times more expensive than Jetstar and Qantas international services on a per passenger basis,” the airline said.
“With 800 Q400s in service worldwide and production currently suspended, the cost of spare parts continues to rise significantly. The rise in engineering costs cannot be attributed solely to pre- or post-pandemic factors.
“For example, in 2023 a landing gear proximity sensor cost $6,700 whereas today, Qantas pays over $10,000 for the same component. Moreover, the year-on-year increases across that time have been rising exponentially from 9 per cent in 2023, 15 per cent in 2024, and to 19 per cent in 2025.”
On a per-seat basis, Qantas says the cost of its regional operations is “significantly higher than mainline domestic and international operations”.
“[This is] due to a number of factors including higher airport and security charges, more expensive fuel, and greater maintenance expenses – with costs having to be spread across a smaller number of passengers compared to larger aircraft and higher density markets,” it said.
Higher costs for regional aviation have been a feature of the industry for a long time however, in recent years, some of the largest regional cost inputs (particularly engineering and airport charges) have been rising significantly above inflation, while revenue from airfares has not.
“The Group has seen a sharp increase in some costs including airport charges and Government fees, which have increased at double the rate of inflation over the past 12 months.”
According to Qantas’ submission, this has led to “difficult decisions” to “ensure both the operational strength and commercial viability of the regional network”.
“For example, earlier this year Qantas announced the suspension of services on the Albury to Melbourne and Wagga Wagga to Melbourne routes,” the submission read.
“Despite attempts to stimulate demand through sales, tactical marketing, adjusting schedules and working with local councils to build awareness, both of these services had insufficient revenue to cover the increasing cost of operations.”
QantasLink currently operates a fleet of 43 Q400s, having retired its smaller Dash 8 aircraft starting in mid-2024.
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