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The Senate Rural and Regional Affairs and Transport References Committee Operation, regulation and funding of air route service delivery to rural, regional and remote communities June 2019 © Commonwealth of Australia 2019 ISBN 978-1-76010-979-0 This document was prepared by the Senate Standing Committee on Rural and Regional Affairs and Transport and printed by the Senate Printing Unit, Department of the Senate, Parliament House, Canberra. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License. The details of this licence are available on the Creative Commons website: http://creativecommons.org/licenses/by-nc-nd/3.0/au/. Membership of the committee Members Senator Glenn Sterle, Chair Western Australia, ALP Senator Barry O'Sullivan, Deputy Chair Queensland, NATS Senator Slade Brockman Western Australia, LP Senator Anthony Chisholm Queensland, ALP Senator Malarndirri McCarthy (to prorogation of Parliament) Northern Territory, ALP Senator Janet Rice Victoria, AG Substitute members for this inquiry Senator Amanda Stoker Queensland, LP to replace Senator Barry O'Sullivan (24 July 2018 only) Senator Peter Whish-Wilson Tasmania, AG to replace Senator Janet Rice Other Senators participating in this inquiry Senator the Hon Richard Colbeck Tasmania, LP Senator Patrick Dodson Western Australia, ALP Senator Rex Patrick South Australia, CA iii Secretariat Dr Jane Thomson, Secretary Ms Sarah Redden, Principal Research Officer Ms Trish Carling, Senior Research Officer Ms Fiona Allen, Senior Research Officer Mr Michael Fisher, Administrative Officer PO Box 6100 Parliament House Canberra ACT 2600 Ph: 02 6277 3511 Fax: 02 6277 5811 E-mail: [email protected] Internet: www.aph.gov.au/senate_rrat iv Table of contents Membership of the committee ......................................................................... iii Abbreviations and acronyms ........................................................................... ix List of recommendations ................................................................................ xiii Chapter 1.............................................................................................................. 1 Introduction and background ................................................................................. 1 Referral ................................................................................................................... 1 Conduct of the inquiry ............................................................................................ 2 Acknowledgements ................................................................................................ 2 Structure of report ................................................................................................... 3 Context of the inquiry ............................................................................................. 3 Australians and air travel ........................................................................................ 4 Deregulation and privatisation ............................................................................... 5 Regular Public Transport (RPT) and regional airports .......................................... 7 Operating environment for regional air services .................................................... 8 Airports and airfields ............................................................................................ 12 Challenges faced by regional airports .................................................................. 16 Key issues considered by the inquiry ................................................................... 18 Chapter 2............................................................................................................ 19 Previous inquiries into regional air services ........................................................ 19 House of Representatives report, November 2003 ............................................... 19 New South Wales Legislative Council report, October 2014 .............................. 22 Western Australian Legislative Assembly report, November 2017 ..................... 25 House of Representatives report, June 2018 ........................................................ 28 Chapter 3............................................................................................................ 31 Social and economic importance of regional aviation services .......................... 31 Aviation services in regional and remote communities ....................................... 31 The impacts of high airfares ................................................................................. 32 Social impacts of high airfares ............................................................................. 36 Chapter 4............................................................................................................ 51 Airport taxes and charges ...................................................................................... 51 Regulatory and compliance costs ......................................................................... 51 History of airport charges ..................................................................................... 56 Consultation between airports and airlines .......................................................... 63 Operational costs at regional airports ................................................................... 64 The impact of regional airport charges ................................................................. 68 Airport views on airport charges .......................................................................... 71 Airline views on airport charges........................................................................... 73 Chapter 5............................................................................................................ 79 Security screening charges ..................................................................................... 79 Security obligations at regional airports ............................................................... 79 Cost of security at regional airports ..................................................................... 80 Review of security regulated airports ................................................................... 81 Upgrades to regional airport security ................................................................... 82 Concerns regarding airport security costs ............................................................ 86 Chapter 6............................................................................................................ 93 Regional airfare pricing by airlines ...................................................................... 93 Regional airfare pricing ........................................................................................ 93 The determination of airfares by airlines ............................................................. 96 Factors affecting air services in regional areas .................................................. 104 Analysis from BITRE ......................................................................................... 109 Chapter 7.......................................................................................................... 113 Other factors influencing airfares ....................................................................... 113 Economies of scale and market forces ............................................................... 113 The role of competition in airfares ..................................................................... 116 Aviation cabotage ............................................................................................... 121 Evidence regarding cabotage .............................................................................. 123 Charter flights and FIFO .................................................................................... 126 Pilot shortages .................................................................................................... 131 Chapter 8.......................................................................................................... 133 Regulated routes and residents fares .................................................................. 133 Regulated routes ................................................................................................. 133 vi Views on regulated routes .................................................................................. 139 Residents fares .................................................................................................... 144 Access to resident's fares .................................................................................... 148 Student travel assistance schemes ...................................................................... 151 Chapter 9.......................................................................................................... 153 Support for regional aviation services ................................................................ 153 Government support for remote and regional aviation ...................................... 153 Aviation strategies across jurisdictions .............................................................. 157 Federal government subsidisation as a community service obligation .............. 160 Remedies suggested to reduce airfares ..............................................................
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