Airlines to be probed over pricey regional fares

Improving airline competition and reducing regional airfares is the focus of a new review of the sector as the future of a vital carrier is at stake.

Treasurer Jim Chalmers and Transport Minister Catherine King announced on Monday that the Productivity Commission will conduct an investigation into sky-high regional airfares.

The commission will examine issues such as competition, pricing practices and the fairness of profits throughout the supply chain.

“Regional Australians deserve reliable air services at affordable prices and that’s what this review is about,” Dr Chalmers and Ms King said in a joint statement.

The investigation was a recommendation of the Aviation White Paper, published in August 2024, which found that ticket prices for flights involving regional airports were on average 52 per cent higher per kilometer than for flights between capital cities.

Regional Australians are also increasingly underserved, with the number of regional routes falling from 458 to 291 between 1989 and 2021.

The number of regional airports served has fallen from 278 to 142 over the same period, while many routes are served by only a single operator, limiting choice and competition.

The collapse of major regional airline Rex, which was the sole operator on many routes, threatened to further restrict the mobility of Australians in the region.

US company Air T has thrown a lifeline to the troubled airline, with executives confirming last week that they had signed a sales and implementation agreement for the airline.

Rex has continued to operate with taxpayer funding since entering into voluntary administration in July 2024.

However, the sale still needs to be approved by creditors who will meet in the coming weeks.

The Productivity Commission will hold public hearings and invite applications before presenting its final report, expected in early 2027.