Determinants of regional airfares

I, the Hon Jim Chalmers MP, Treasurer, pursuant to Parts 2 and 3 of the Productivity Commission Act 
1998, hereby request that the Productivity Commission (“the Commission") undertake an inquiry into 
the determinants of regional airfares.

Background

Concerns have been raised through the Aviation White Paper development process about the cost, 
frequency and reliability of regional air services in Australia. 

Australia’s aviation network serves a very large geographic area, and regional airports carry around 
40 per cent of all domestic passengers. Given the smaller markets served, regional air routes 
generally have fewer airlines servicing them and less competition than routes between major cities. 
State and territory governments have in place a variety of arrangements to support intra-state 
aviation in their jurisdictions. 

Recognising the importance of air services to regional development, more accessible regional 
airfares could help unlock economic activity and productivity in regional Australia. This includes 
improving the provision of goods and services for regional Australia, increasing demand for tourism, 
improving Closing the Gap outcomes and supporting regional migration.

Scope of the inquiry

The Commission will conduct a review of the determinants of regional airfares in Australia and make 
recommendations on policy settings to support a competitive, reliable and affordable regional 
aviation network.

For the purposes of this inquiry, the term ‘regional’ encompasses passenger flights to or from areas 
outside Australia’s major cities (i.e. regional, rural and remote areas).

In undertaking the inquiry, the Commission should holistically consider a range of factors, including 
but not limited to:

• analysing the determinants of regional airfares and service offerings, and the composition of 
  factors that contribute to differences between airfares available on regional routes and 
  those available between major cities, including airport fees and charges;
• identifying the main drivers of demand for regional air services;
• examining any barriers to entry or expansion for airlines to provide regional services;
• identifying policies and regulatory settings that may contribute to higher regional airfares, 
  reduced service levels or reduced competition;
• assessing the role for government and the most efficient forms of government intervention 
  in the market and other policies to improve access, pricing and service outcomes;
• identifying the impacts of regional air fares and access to regular and reliable air services on 
  regional economies (including tourism and migration), productivity, and improving 
  Closing the Gap outcomes;
• identifying the extent of competition between different air transport services (regular public 
  air transport and charter) and with other modes of transport (road and rail), and the role of 
  regional air freight in supporting the commercial viability of regional air services; and
• considering international comparisons and best practices in comparable aviation markets.

In undertaking the inquiry, the Commission should consider all entities which affect regional 
aviation, including airlines, airports, aircraft maintenance, aircraft part suppliers, fuel suppliers, 
supply chains, regulators and any other entities which contribute to costs and other determinants of 
airfares. 

Process

The Commission is to undertake a public consultation process including holding public hearings, 
inviting public submissions and releasing a draft report to the public.

The Commission should consult with a broad range of stakeholders, including the Commonwealth, 
state, territory and local governments, airlines, airports, relevant aviation industry and tourism 
operators, regional communities and businesses, including First Nations peoples.

The Commission should have regard to previous inquiries in relation to the economic regulation of 
airports and the Australian Competition and Consumer Commission’s domestic airline monitoring.

The final report should be provided within 18 months of the receipt of these terms of reference

The Hon Jim Chalmers MP
Treasurer

[Received 27 October 2025]