Suggestions Qantas should charge more on high volume city to city flights to subsidise lower fares for regional passengers was met with alarm today.
Senior Qantas executive Andrew David said the idea would jeopardise the national carrier's bottom line.
Responding to questions from a Senate committee in Darwin today, Mr David, the Qantas chief executive for domestic and freight business, said Qantas had to compete with other airlines in those city markets on price.
Queensland Senator Barry O'Sullivan suggested an extra charge of about $20 per ticket for Melbourne to Sydney flights could dramatically reduce the exorbitant cost of air fares in country areas.
Mr David said Qantas was unlikely to pursue the notion.
Four Qantas chiefs lined up before the regional airline investigation today, the last of the major airlines to do so.
The Qantas boss was more open on exploring cheaper fare deals for country students which he has promised to "look at".
Students in the Northern Territory, and remote areas in other states, travelling long distances to other states for boarding schools face thousands of dollars in air fares, the committee was told.
Senators spent most of the hearing probing Qantas' fare structure asking for explanations on the vast difference between city and rural air fares.
"Flights to regional towns are often higher because costs in remote places are higher, and these costs must in turn be spread across a smaller number of passengers," Mr David said in a prepared opening statement.
"The cost of regional operations, on a per seat basis, is about 50 per cent higher than capital city operations, and 125 per cent higher than international operations.
"So, to cover these higher costs and the lack of scale, fares are naturally higher.
"The major costs are labour, fuel, maintenance – and airport charges.
"Airport charges make up a significant and growing portion of the price of airfares."
Senator O'Sullivan disputed Mr David's claims saying the fixed costs were only a small proportion of an air fare which could cost more than $1000 for regional passengers.
Mr David said Qantas needed to make a profit for its shareholders, invest for the future and maintain a workforce of 30,000 people.
"The majority of travel to a lot of regional markets is for business purposes. Residents in regional communities make up a very small percentage of total Group Domestic travel.
"Some of our regional routes actually run at a loss, others are pretty much break-even," he said.
The airline heavily promoted its discounted regional fare scheme introduced now to 13 regional cities, including Alice Springs.
There was also a discussion about plans to upgrade security screening at smaller regional airports and whether Qantas and other airlines could carry the extra cost.
Qantas executives agreed extra security costs would place some routes "at risk".
They have agreed to share more information on the routes they believe may be at risk with the committee.
The committee is due to report back to the Senate with its findings on June 27.
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