Productivity Commission probe into regional airfares as Rex Airlines hangs in the balance

Improving airline competition and reducing regional airfares are the focus of a fresh review into the industry as a vital carrier’s future hangs in the balance.

The Productivity Commission will conduct an inquiry into sky-high regional airfares, Treasurer Jim Chalmers and Transport Minister Catherine King announced on Monday.

The commission will examine issues including competition, pricing practices and whether profits along the supply chain are fair.

“Regional Australians deserve reliable air services at reasonable prices and that’s what this review is about,” Dr Chalmers and Ms King said in a joint statement.

The inquiry was a recommendation of the Aviation White Paper released in August 2024, which found ticket prices for flights involving regional airports were on average, 52 per cent higher per kilometre than flights between capital cities.

Regional Australians are also increasingly underserved, with the number of regional routes falling from 458 to 291 between 1989 and 2021.

The number of regional aerodromes served has fallen from 278 to 142 over the same period, while many routes are only serviced by a single operator, limiting choice and competition.

The collapse of key regional airline Rex, which is the sole operator on many routes, has threatened to further limit mobility for regional Australians.

US company Air T has thrown the troubled carrier a lifeline, with administrators last week confirming they had entered into a sale and implementation deed for the airline.

Rex has continued to operate with taxpayer funding since entering voluntary administration in July 2024.

But the sale must still be approved by creditors, who will meet in the coming weeks.

The Productivity Commission will hold public hearings and invite submissions before delivering its final report expected in early 2027.