Australia's regional airfares have long been a sore point, and a Productivity Commission interim report has finally put hard numbers on the problem. After being given access to confidential airline cost and revenue data, the Commission found that fares on regional and remote routes averaged 13 per cent more per kilometre than major city fares between 2023 and 2025. On some short routes, the per-kilometre price was more than double.
The uncomfortable twist: those high fares mostly aren't padding airline profits. Operating costs account for roughly 91 per cent of the average regional fare, with margins sitting around nine per cent — broadly in line with big-city routes. Commissioner Martin Stokie put it plainly: regional flights are expensive because they cost more to run.
That's partly a numbers game. More than 90 per cent of regional and remote passengers flew with Qantas Group or Virgin Australia in 2025, and 72 per cent of routes had only one carrier. But half of those routes ran ten or fewer flights a week, and over a third of seats flew empty. When an airline has to spread fixed costs across a handful of passengers, the choice is higher fares or losses. For many small communities, there simply isn't enough traffic to tempt a competitor in — so 'lack of competition' and 'no viable competition' turn out to be different problems.
There are exceptions. Mining routes earn significantly above-average returns, while some remote services run on margins below five per cent, raising questions about whether they can survive at all. As Commissioner Catherine de Fontenay noted, there's no single regional aviation market — a remote island community's challenges look nothing like those of a mining centre or a large tourism hub.
On bigger routes, the barriers are different: economies of scale, corporate travel contracts and brand loyalty make it hard for new airlines to break in, even where demand exists. The Commission recommends governments clear obstacles to competition but avoid propping up individual carriers.
Its bigger proposal shifts the focus from airlines to passengers. Assistance should follow transparent criteria and target people who otherwise couldn't afford essential travel — especially those flying for medical care. That means strengthening patient assisted travel schemes, reconsidering eligibility and coverage, and reducing the upfront costs patients must cover before being reimbursed. The report also criticises the case-by-case way governments fund regional airports, calling for a system-wide approach so some airports aren't over-funded while others miss out.
For travellers, the takeaway is mixed. If you're booking a regional flight in Australia, don't expect a budget competitor to appear on thin routes anytime soon — the market data suggests none would survive. The realistic hope for cheaper travel lies with government support aimed at passengers rather than airlines. Submissions and public hearing registrations are open now, with the final report due to government in April 2027. Whether any of it translates into a cheaper ticket remains the harder question.
