Regional airfares – expensive but cheap!

2502
August 14, 2018
Virgin Australia

Around the world, the debate rages as to why short-haul regional airfares are so expensive.

But the reality is while they are expensive compared to long-haul flights they are cheap compared to what they cost 50 years ago.

One example is the airfare from Perth to Pt Hedland in the north of Western Australia.

In 1968 at the start of that state’s resources boom, the one-way fare was A$67.60 while the average weekly earnings were almost the same at A$62.50.

Fifty years on the cheapest fare is $351 (A$0.26/km) but the average weekly earnings have soared to $1,628, so the fare today is almost five times lower.

READ: MH370 final report a cover-up

Fueling the debate in Western Australia, and in fact across Australia and New Zealand, are firstly the cost comparisons of flying to the holiday island of Bali, Indonesia, where labor costs are seven times lower than Australia.

The other comparison made is the Australia to London airfare where the typical one-way cost is $870 which translates to just $0.06/km.

No matter where you look around globe short regional flights are much more expensive than long-range flights as the graphic below shows.

airfares

The differences underline one of the fundamentals of airlines, the substantial basic costs such as the cost of the aircraft, support, taxes, and charges.

The biggest factor in the cost of a fare is the flag-fall or backroom cost of having the plane waiting on the tarmac.

Boeing estimated in the 1990s that up to 75 percent of an airfare could be attributed to these costs that include maintenance, sales, administration and infrastructure costs.

Even the taxes and airport charges do not reflect the distance you are going to travel and when airlines have seat sales, airports rarely if ever reduce charges to assist.

And those charges can make up a significant proportion of the fare.

One WA regional airport charges A$25.80 for each arriving and departing passenger and then there is a $14.57 screening fee for a departing passenger. Airport charges in WA have accounted for up to 40 percent of some sale fares.

Fuel burn is also much higher on a short-range trip because of the extra fuel used just to reach cruising altitude. On a 600km journey of about one hour, half of the fuel load will be used in the first 15 minutes getting to cruise altitude.

The economy of scale is also a major contributor to the cost with planes such as the 365-seat Boeing 777 having vastly better economics than a short-range 162-seat Boeing 737.

Because shorter range planes such as the Boeing 737 perform up to six landings and take-offs a day the maintenance cost on the airframe and engine is comparatively much higher than say a long-range Boeing 777 which may just do one cycle a day.

An extreme example of the economy of scale and short distance is the flight from Perth to Rottnest Island off the coast. The distance is 35.2km but the one-way fare is $78 or A$2.22/km.

If you were to apply that cost to a Perth to London return flight the fare would be over $28,000!

In Western Australia, there is also a raging debate that suggests that the intra-state flights are more expensive than any other in Australia. However, as the graphic below shows that is not the case and in fact, some comparison fares are cheaper.

airfares