By DAMIAN FRANCIS, Editorial Director
TOWARDS A BIG DEBATE 2026
It feels like a somewhat ironic time to be discussing regional airfares when we know for a fact that all airfares are heading north if they haven’t already.
Treasurer Jim Chalmers wouldn’t have purposefully set the submission date for the Productivity Commission’s inquiry into the determinants of regional airfares in the middle (or are we at the start?) of a significant conflict in the Middle East that has seen jet fuel prices skyrocket so much that even the airlines who participate in hedging are going to lose out.
If he did, he has a wicked sense of humour and a fantastic magic eight ball which Travel Daily would well and truly like to get its hands on. Back to reality…
The inquest was, of course, conceived far earlier than the current Middle East issues and was born out of the Aviation White Paper: Towards 2050, released in August of 2024.
That paper, all 234 pages of it, served as a bit of a wakeup call to the industry in a number of areas, and had flagged the need for the current productivity commission inquest, such was the perceived issue at that stage around regional airfares.
In it, it mentions the downfall of Bonza and Rex, so it was with great interest that Travel Daily editor Adam Bishop got his hands on former Bonza CEO Tim Jordan’s submission to said inquest.
Where in regional aviation was he going to insert the knife and how far was he going to twist it? And would he have some very hard-to-swallow but relevant points?
Before the rest of the submissions come flowing in, this felt like a good opportunity to take a look at the thoughts of a key player in recent history in the regional aviation space, one that was well and truly bitten hard.
Empty back of the big bus
The 14-page submission was detailed without being overboard, with a largely expected argument coming from the CEO of a now defunct Australian LCC, but he chose an interesting place to start.
“The single largest driver of airline operating costs is the aircraft size operated,” Jordan wrote. “Simply put, the larger the aircraft operated the lower the average seat operating cost.”
He went on to explain that in regional Australia, smaller aircraft are generally operated and seat costs for customers are therefore higher than on trunk domestic capital city markets.
Jordan labelled the magnitude of the difference between trunk markets as “a regional rort” and at a level that it should not be at.
It was an interesting point to make.
Critics of the argument would point to the multiple claims back in the late naughties of the A380 fuel economy with the suggestions it was more fuel efficient than a hybrid Toyota Prius… if you could fill the majority of seats.
Ninety-five miles per gallon was being thrown around on a fully loaded, all-econo A380 (that would be around 850 passengers – and we are all grateful that never happened) compared to 45 miles per gallon for Japan’s finest hybrid motor vehicle (at the time).
Look at the Airbus A380 now, though – production has halted. Too few routes could fly it viably.
Bonza, of course, deployed an all 737 Max-8 fleet when backing came from 777 partners – aircraft of a size that many of the regional routes it decided to plough had never seen before. To those routes, it would almost have seemed like an A380.
The opportunity to fill the planes didn’t exist and therefore neither did the economics.
The AFR reported back in May of 2024 that it had sighted Jordan’s initial plans for Bonza, which included “72-seat planes (twin-engine turboprops), 83 percent full”.
Per the AFR again, “If Bonza’s plan for 72-seat planes was never going to succeed, it made even less sense with the 180-seat 737 Max-8s”.
According to Jordan, “On the 36 routes flown at the time of entering administration, Bonza averaged 130 passengers, a 70% load factor across all flights from the first flight to last flight”.
If that’s true, flights would have sold out regularly on the 72-seat turboprops – a great business model. Crystal ball gazing never served anyone much good, but imagine if the airline had a fleet of Airbus A220s.
He also mentioned the fact that 83% of the new routes were not operated by any other airline – a fact that could have contributed to Bonza’s downfall.
Watson Farley & Williams Partner and aviation expert Alan Polivnick took a look at the submission and told Travel Daily, “the routes Bonza flew were not ‘ignored’ but for many of these routes, there was no business case for the existing airlines to launch these routes”.
According to BITRE, the industry wide load factor decreased from 83.8% in December 2024 to 82.6% in December 2025, but that’s still significantly higher than the 70% average across all of Bonza’s flights.
Jordan also made the statement that, “Typically, new low-cost entrants offer low-cost services on the largest and most densely flown markets in the domestic market in question”.
Bonza of course didn’t do this and failed. Polivnick reminded me that there are a few key examples where the strategy of ignoring densely flown routes has worked.
“This is not how many of the more successful LCCs started,” he told me.
“A good example of this is Air Asia, which initially focused on attracting consumers who had never previously flown (‘Now everyone can fly’) and on routes which were not served by existing airlines.
“Bonza had a similar focus, however, unlike Bonza, Air Asia had much larger population centres and target groups, and more of its initial routes were not seasonal or leisure routes.”
Polivnick added that shorter flight times and lack of curfews allowed Air Asia to operate its aircraft on high daily rotations to improve profitability and lower operating costs without significant seasonal variations.
A regional monopoly?
Interestingly, Jordan also pointed the finger at regional airports and their “geographical monopolies”.
“[It] is proposed that the ACCC have an ongoing oversight of all airport charges levied on airlines via a commercial arbitration framework that would allow arbitration to take place if airlines could not reach mutually agreeable commercial arrangements with all Australian airports,” he wrote.
Polivnick pointed out that, “The ACCC already has this oversight power and publishes regular reports of airport charges”.
“[Its] monitoring powers were introduced in 2002 to replace its power to regulate prices.”
In section 1C of his submission, Jordan details the lack of choice when it came to ground suppliers and related services at regional airports. Unsurprising when they are potentially only servicing one or two flights per day.
I understand that the Airports Association of Australia (AAA) will provide its submission to the Productivity Commission soon, but in the meantime, I asked AAA CEO Simon Westaway for his thoughts on Jordan’s claims.
“The Productivity Commission has previously found that regional airports have limited market power due to small passenger markets and high fixed operating costs, with many struggling to cover the cost of running the airport,” he asserted.
“It means that regional airports are primarily focused on supporting airline services and maintaining connectivity for their communities.
“Airports across Australia have also worked hard to support new airline entrants, including providing millions of dollars’ worth of support to Bonza in an effort to give the airline every possible chance of success and improve regional connectivity.”
He pointed to the fact that the support came with risk, and that airports were left out of pocket when Bonza collapsed.
Perhaps old, but relevant still, is the Economic Regulation of Airports Productivity Commission Inquiry Report of 2019.
Geographic monopolies versus carrier duopolies – it’s a fascinating battle.
The report stated, “Some inquiry participants, particularly airports, said that domestic airlines have significant countervailing power (AAA, sub. 50; Adelaide Airport, sub. 32; Australian Airports, Investors Group, sub. 20; Brisbane Airport, sub. 38; Canberra Airport, sub. 56; Hobart Airport, sub. 31; Melbourne Airport, sub. 33; North Queensland Airports, sub. 49; Northern Territory Airports, sub. 8; Perth Airport, sub. 51; Starkie, sub. 22; Sydney Airport, sub. 53)”.
It continued: “Other participants strongly disagreed that airlines have significant countervailing power. For example, Virgin Australia Group (sub. DR142, p. 3) said the draft report ‘grossly overstates’ the extent to which an airport is constrained by countervailing power, while Qantas Group described airline countervailing power as a ‘myth'”.
Funny the lines down which that was split.
The report pointed to major airports exhibiting “characteristics consistent with them having significant market power in domestic aeronautical services”, naming Sydney, Melbourne, Brisbane and Perth specifically, while it also suggested “many regional airports do not have sufficient demand for airport services to cover the costs of running the airport”.
Could ACCC oversight via a commercial arbitration framework, as suggested by Jordan, be the answer?
Polivnick thinks not.
“Agreements between airlines and airports already have dispute resolution clauses,” he said. “An arbitration is confidential and limited to the parties in the arbitration agreement.
“Including the ACCC on commercially sensitive agreements between airports and airlines may be unworkable and unacceptable to many airports and airlines.”
One submission out in the open and already some fascinating debate being thrown around.
Look out for more coverage from Travel Daily as the story continues to grow.
The rest of the week
Speaking of fuel and airlines, Air New Zealand blinked first after it announced on the ASX that it would need to hike airfares with the rapidly increasing fuel costs.
The Kiwi carrier suspended its guidance for the 2026 fiscal year due to volatility in the jet fuel market following the recent escalation of conflict in the Middle East.
It also then announced that it would cut 1,100 flights over the next six to eight weeks.
In more positive news, Scenic announced major growth in its river fleet with the addition of three new luxury river ships across its Scenic Luxury Cruises & Tours and Emerald Cruises brands.
The ships will consist of two ultra-luxury Scenic Space-Ships and one new Emerald Star-Ship, with the trio to begin sailing in Europe and Asia in 2027 and 2028.
Movement continued on the training front as well when the Australian Travel Industry Association (ATIA) teamed up with My First Job to launch The Travel Gap, a new program designed to help grow the sector’s future talent pipeline.
And after SXSW Sydney dropped by the wayside, it looks like Vivid Sydney may be attempting to slot into the vacant place. It announced this week a raft of additions to the program, namely daytime events and talks that seemed to have a bit of a similar vibe to what SXSW had.
Finally, but certainly not least interestingly, Cruise Weekly’s Myles Stedman got to speak with Regent Seven Seas Cruises (RSSC) president Wes D’Silva, who said his appointment would allow chief luxury officer Jason Montague to focus on long-term strategy for NCLH’s luxury brands as the group prepares to bring almost 10 new ships online over the next 10 years.
That wraps up the week in travel. If you haven’t already, make sure you relive the CLIA Awards last weekend with the Cruise Weekly special edition, which you can download here.
Enjoy the weekend.
Damian
