Regional airlines not price gouging: Senate committee

Lack of demand, economies of scale and higher fuel and maintenance costs are to blame for higher airfares on regional routes like Port Lincoln-Adelaide, not "price gouging" by airlines, a Senate committee inquiry has found.
Lack of demand, economies of scale and higher fuel and maintenance costs are to blame for higher airfares on regional routes like Port Lincoln-Adelaide, not "price gouging" by airlines, a Senate committee inquiry has found.

Lack of demand, economies of scale and higher fuel and maintenance costs are to blame for higher airfares on regional routes, not "price gouging" by airlines, a Senate committee inquiry has found.

In its report, handed down this month, the Senate's Rural and Regional Affairs and Transport References Committee said the evidence presented to the inquiry into regional air services did not point to "price gouging" or other market manipulation by airlines.

"While the committee notes that such a finding may frustrate residents who consider that regional airfares are unnecessarily excessive, the extensive evidence put before the committee in this inquiry does not allow such a conclusion to be reached," the report said.

"Unfortunately, there are immutable costs associated with the operation of an aircraft, and these cannot be reduced simply because a route is not between major metropolitan centres."

Among its recommendations the committee called for a Productivity Commission inquiry into factors affecting regional airfares and an investigation of the feasibility of increasing operational subsidies and introducing other price control alternatives.

The committee also recommended the federal government complete a financial analysis to determine the ongoing operational, maintenance and staffing costs of changes to passenger security screening at regional airports.

The Australian Airports Association (AAA) chief executive officer Caroline Wilkie said the inquiry's findings identified the unique challenges communities faced to access affordable air services, and the rising cost of maintaining safe and compliant regional airport operations.

Ms Wilkie said the committee had made a number of "sensible recommendations" relating to the funding and purchasing power of regional airports.

"The AAA fully supports the committee's call for a detailed financial analysis of the impact of changing government security requirements on regional airports."

In its evidence to the inquiry Qantas said all its South Australian routes would be in jeopardy based on estimated security costs of between $700,000 and a million dollars a year of ongoing operating costs.

Ms Wilkie said a thorough analysis of the ongoing costs, followed by a review of how changing requirements would be funded, would help ensure a smooth transition.