Source : Perth Now news
Qantas has dodged questions on whether it “aggressively” competes with rivals on regional routes amid fuel, security and labour cost pressure on services.
A Senate inquiry into regional aviation services heard the routes are significantly more expensive than other domestic and international flights due to higher costs outside the cities.
Those expenses are then shared among fewer passengers, vastly limiting the profitability of regional routes.
Qantas’s entry into more regional destinations has also long raised questions about competition dynamics in the thin market.
The airline’s domestic chief executive Markus Svensson was on Friday asked whether the company entered regional routes “aggressively”.
“I prefer not to answer that,” Mr Svensson told the hearing at Parliament House in Canberra on Friday.
“We are focused on our customers, we are focused on having competition.
“At the end of the day … we want to make the most out of the time we have an aircraft to get the best utilisation.”
A report by the consumer watchdog showed up to 50 per cent of domestic passengers travelled on routes serviced by three competing airlines between late 2021 and mid-2024.
That figure slumped dramatically when Bonza went bust and Rex abandoned its intercity operations, the Australian Competition and Consumer Commission’s submission to the inquiry said.
After regional carrier Rex complained Qantas entered routes it had historically operated, the watchdog concluded there were a range of factors influencing competitive dynamics.
Mr Svensson said QantasLink’s turbo-prop flights cost more than twice as much as a 737 service and three times as much as a Qantas or Jetstar international service on a unit-cost basis.
“Governments can’t control global oil prices, weather, aircraft supply, or engineering constraints, but they can influence taxes, regulation, and the charges set by government agencies and airports,” he said.
Virgin’s chief customer officer Andrew Cleary said some regional routes slipped from being marginally profitable to “significantly” loss-making when the Strait of Hormuz closure forced up fuel prices in March.
Fuel costs and lower demand forced the airline to withdraw from routes such as Adelaide to Cairns and Hobart and Uluru to Brisbane and Melbourne.
“Jet fuel just made it completely unsustainable,” Mr Cleary said.
“This is not a two-to-three month spike in jet fuel.
“There are very few people in the industry who believe this will be a short-run impact.”
Rex on Wednesday announced it would no longer run Sydney flights to and from Orange and Port Macquarie in regional NSW, citing high fuel costs and low demand.
The inquiry is due to report by December.
