Canberra already funds regional aircraft. It just funds the old ones

October 2026. First published in the Australian Financial Review on 15 October 2026 as “A nationalised fleet is the way to fly planes to the regions”.

The Senate inquiry into regional aviation resumes in Canberra on 16 October. Senators will hear what every country traveller already knows: routes are shrinking, fares are rising, service reliability is falling and the aircraft are getting older. They should also hear something less familiar. The Commonwealth is already in the regional aircraft business. It is simply at the wrong end of it.

When Rex collapsed in 2024, taxpayers stepped in (although they weren’t asked if they wanted to). When its new American owner, Air T, took control last December, the Commonwealth stayed on as lender: an interest-free loan of more than $100 million over 30 years, extendable to 50, plus a new $60 million facility, both tied to “Rex Regional Commitments” on service levels. Canberra already writes conditional finance for regional flying. It just writes it for Saab 340s more than 30 years old on average. Air T says it can keep them flying for another ten to fifteen years. By then, some will be past 40.

That matters. The aviation industry measures accidents that destroy an aircraft using ‘hull-loss rates’. Worldwide, for older-generation turboprops this rate is approximately seven times higher than it is for the newest turboprop in production, the ATR 72-600. These are worldwide rates for the aircraft category, not any specific airline’s record. If the Manly ferry were seven times more likely to sink than the Parramatta service, it would be closed by Friday.

Regional passengers also pay far more for the privilege. The federal government’s own Aviation White Paper found regional fares 52 per cent higher per kilometre than fares between capital cities. Sydney–Coffs Harbour fares have risen 289 per cent since 2019. Treasury found passengers on single-airline routes pay about 40 cents a kilometre; where three airlines compete, 19 cents. Since 1989, the number of regional routes has fallen from 458 to 291.

The standard response is temporary and uninspiring: a small grant, a route subsidy here, an airport upgrade there, renewed a year or two at a time. It does not change the age of a single aircraft, and without new equipment nothing else changes. With an acquisition cost generally close to $30 million for a new 42-seat ATR 42-600, small regional carriers cannot raise the capital for modern aircraft, so they fly old ones until the numbers stop working.

Rather than federal funds propping up one operator’s 30-plus-year-old aircraft and distorting the market, apply the same principle to new aircraft. Establish a Commonwealth regional aircraft investment fund to buy modern turboprops and lease them to regional carriers at concessional rates. The lease comes with obligations: minimum weekly services on designated routes, a cap on fares and a ceiling on cancellations. Meet them and you keep the aircraft, all at a lease rate that covers the cost of sovereign capital. Cut the service or gouge the fare, and the aircraft goes to an operator who will fly it compliantly. Modern aircraft for guaranteed service. And the taxpayer owns an asset pool, not an expense line.

This is neither socialism nor novel. State governments already own the trains, buses, trams and ferries that carry city commuters, and contract operators to run them. The federal government spends about $237 million a year so that shipping goods and cars across Bass Strait costs Tasmanians closer to what the same distance by road would cost. The constitutional mechanisms already exist. What is missing is the decision to point them skywards and towards the regions.

Similar logic applies at the airport. Airport security is charged airport by airport, so fixed screening costs at regional airports fall on the few passengers. Mount Gambier handles 71,000 passengers a year, and the council that runs its airport warned last year that, without help, screening would add $90 to a ticket. Security is an obligation set by federal regulation. It should be funded nationally.

Nor is it untested abroad. The United States has guaranteed air service to small communities since 1978. The European Union protects 165 routes under public service obligations. Australia has state-based support mainly for intrastate flights, short-term grants, white papers, reviews and inquiries.

Our submission to the inquiry estimates the full reform package at about $15 billion to 2040, including a fleet of modern turboprop aircraft, against a cost of inaction, in lost regional output, health costs and city congestion, of $180 billion to $240 billion. That is $12 to $16 saved for every dollar invested. Doing nothing is the far more expensive option.

Regional Australians are not asking for charity. They are seeking economical air services they can rely on. The Commonwealth already has the tools, and it is already financing aircraft, just the wrong ones.

Rick Howell is Principal Consultant at Honos Group, which advises airlines, investors and lessors on aircraft transactions, including turboprops, and co-author, with Neville Hodges, of a submission to the Senate inquiry into regional aviation.