No price gouging by local airlines

Lack of demand, economies of scale and higher fuel and maintenance costs are to blame for higher airfares on regional routes like Ceduna-Adelaide, 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.

She 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.

In the report Regional Express, the sole operator out of Ceduna, claimed that its single biggest cost item was airport charges, which had a large impact on its operations.

It called on local councils, as owners of regional airports, to reduce airport charges and passenger taxes, noting that doing so would help to reduce ticket prices and stimulate passenger numbers which would be a boost for the community.