Regional airports struggling with costs, call for infrastructure fund

While Australia’s major airports are among the most profitable in the world, it’s different for regional and remote aerodromes.

Passengers board a Sharp Airlines flight at King Island.

While Australia’s major airports are among the most profitable in the world, it’s a different matter for regional and remote aerodromes.

As the Productivity Commission inquiry into the economic regulation of airports casts a bright light on the industry in Australia, the challenges faced by council-run operations have been laid out.

Although legislation demands these airports meet similar standards of infrastructure, maintenance and security to metropolitan airports, sources of income are generally much fewer.

In a frank submission, former Regional Express (Rex) managing director Geoffrey Breust said a new approach to the funding of Australia’s regional and local airports was needed.

“Regional and local airports are unviable on a fully commercial basis,” Mr Breust said. “The high cost of infrastructure development, heavy repair and maintenance, compliance and general operating costs cannot be covered from the charging levels needed to maintain Australia’s regional and local airport system.”

It is a view shared by Australian Airports Association chief executive Caroline Wilkie.

She said that over the next decade, airports outside the major cities faced an expected 38 per cent increase in costs as a result of new and emerging infrastructure requirements.

At the same time, regional airports were under pressure not to increase charges, with some forced to reduce charges under the threat of airlines withdrawing their services.

In the case of King Island Airport off Tasmania’s northwest coast, increased charges prompted Rex to withdraw 30 per cent of its services.

In its submission to the PC inquiry, King Island Council said the increase was necessary to address mounting financial losses by the airport, which had blown out from $280,000 in 2016 to $470,000 this year.

The submission said the withdrawal of Rex, as the only airline servicing Tullamarine in Melbourne, had made a “dire impact” on tourism operators on the island.

“One business reported lost revenue of almost $150,000 in the month that the changes came into effect,” said the submission.

“This level of impact on a community the size of King Island is significant and the threat of such will hamper council’s decisions in considering how to best manage its assets for the good of the whole community.”

The submission also highlighted other difficulties regional councils faced in operating airports as a result of a federal government decision to hand over control in 1994.

King Island Council said attracting qualified and experienced aviation professionals to regional airports was a considerable challenge.

“Remote island airports such as King Island continue to either appoint good non-aviation people and attempt to train them up, or do the best they can recruiting on the limited remuneration they can offer,” said the council’s submission.

Mr Breust said a National Airport Infrastructure Fund was needed to provide grants to regional and local airports for approved major refurbishment and development works. He said part funding could be provided from a levy of 2.5 per cent on the non-aeronautical revenue collected by capital city airports, in recognition of the benefits they received from the wider air transport network.