Virgin Australia says regulation restrictions, high airport charges restrict regional connectivity

21 February, 2018

Virgin Australia, in a 16 page submission to the Senate Rural and Regional Affairs and Transport Committee's inquiry into the operation, regulation and funding of air route service delivery to rural, regional and remote communities, stated (Feb-2018) regulatory restrictions and high airport charges are impediments to operating more services to regional communities. The carrier also noted that "there is a critical role to be played by all levels of government in supporting regional air services". Key points included:

  • Economic challenges: Virgin Australia said regional services were more challenging from an economic perspective compared with routes between capital cities, given the difficulties of achieving economies of scale. "Virgin Australia is aware that some regional communities hold a perception that airlines are seeking to earn unreasonable returns in setting airfares on regional routes and/or that airfares on such routes are cross-subsidising pricing on trunk routes", Virgin Australia said, adding: "As many of the regional routes we serve do not deliver acceptable commercial returns at current levels of pricing, this perception is inaccurate. As with all routes we serve, the sustainability of our regional services relies heavily on our ability to match the capacity we deploy with the demand for our flights, as well as the effective management of costs". The carrier also noted the inherent cost challenges on regional services, noting: "Due to a lack of scale, costs of operation on a per passenger basis are always higher on regional routes than on trunk routes between capital cities. With fewer passengers and frequencies across which such costs can be allocated, it is more difficult to achieve cost efficiencies on regional routes";
  • Sydney Airport slots: Virgin Australia also noted Sydney Kingsford Smith International Airport slots as an issue, stating: "In 2017, during Sydney Airport's morning peak period (07.00-09.00) and afternoon peak period (17.00-19.00) there were 42 fewer slot pairs available for regional services compared with 2001 (a decline of 10%). This has created a situation where the availability of slots at Sydney Airport for NSW regional services in the morning and afternoon peak periods is extremely limited. Timings in these periods are necessary for the operation of viable services by airlines, as they enable day trips to be undertaken by travellers originating both in Sydney and regional communities;
  • Airport charges: Virgin Australia stated regional airports "should be encouraged to seek funding from the Commonwealth and/or state/territory governments to support investment in infrastructure". The carrier also commented: "Charges imposed on airlines vary from airport to airport. For an aircraft turnaround at regional airports in WA, such charges are on average around double those levied by the regional ports we serve in NSW and Victoria, on a cost per-passenger basis.6 Charges imposed by some regional airports in Queensland are also significantly higher on average than those in NSW and Victoria (although there is greater variation in charges across regional airports in Queensland compared to WA)";
  • Airport security: Virgin Australia said rising aviation security costs represent an "ongoing challenge to the sustainability of regional air services". [more - original PR]