Virgin Airlines has told the Senate airline Inquiry it is not responsible for high air fares in regional routes as they blamed everyone except themselves for the problem.
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The full Hansard transcript of their question and answer session at the Brisbane hearing into "the operation, regulation and funding of air route service delivery to rural, regional and remote communities" is not yet available though the Inquiry has released Virgin's opening statement.
Virgin told the inquiry there were substantial challenges that has caused them to exit or reduce frequency on some regional markets due to sustained poor commercial performance.
"Achieving the economies of scale necessary to operate a sustainably profitable regional service is a more difficult proposition compared to services between capital cities, due to the need to spread the costs of the flights - many of which are fixed - over a smaller number of passengers," Virgin told the Inquiry.
"Further, the sustainability of our regional services relies heavily on our ability to match the capacity we deploy with the demand for our flights."
Virgin said the charges imposed by some regional airports were "prohibitively high", a claim contradicted by QAL (owners of Mount Isa Airport) at the Longreach hearing and by Cloncurry Shire Council (owners of Cloncurry Airport) at the Cloncurry hearing.
Virgin told the Inquiry their submission to the Productivity Commission's current review of the economic regulation of airports called for changes to the regulatory framework, including the introduction of a negotiate-arbitrate model "as a means of constraining the market power of airports as monopoly service providers".
Virgin also said the proposed federal changes to aviation security requirements also had the potential to dramatically increase the costs for screening of passengers and cargo at regional airports, which will be reflected in higher airfares - though that would not explain the current pricing regime.
Virgin Australia said they were aware many in regional communities thought they were earning unacceptable returns on airfares in regional markets.
"As many of the regional routes we serve are currently operated at marginal levels of profitability, this is not an accurate perception," they said.
Virgin said they managed the pricing and sale of seats on a flight in accordance supply and demand.
"For each flight, we aim to sell each seat at the right price in light of the prevailing competitive dynamic in the market, in order to enable us to cover the costs of the operation of the flight and if possible, earn a reasonable return on invested capital," they said.
"We encourage our passengers to book as early as possible to secure the best fares and take advantage of the discounted advanced purchase fares and special sale fares that we regularly offer across our network."
They urged "continued collaboration between all stakeholders" to implement regional economic development initiatives to drive increased demand and passenger volumes and drive policy and regulatory initiatives to lift the competitiveness and productivity of the Australian aviation industry.
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