Isolated and aging populations are being let down by expensive ticket costs, Madeleine Lawler, chief executive of Regional Development Australia on the Mid North Coast of NSW, warned.
Her comments came during the latest public hearing into the state of Australia's regional aviation sector.
Flights from Coffs Harbour or Port Macquarie cost about 71 cents per kilometre but from Ballina, where budget flights are available on Jetstar, the average is 12 cents per kilometre, Dr Lawler told the inquiry.
"When I first moved to Coffs Harbour, I was able to get a Bonza flight for under 100 bucks, or Tiger Air was in there for a while, and I was able to get around in a really affordable way," she said.
"We are slicing demand out of our economies by not having those lower price points available in the market, and that means our tourism economies suffer as well."
But half-empty planes could not cover costs required to run a flight, so Rex shared the burden with travellers from the bush or cancelled services, the struggling airline's network strategy general manager Warrick Lodge told the hearing.
"You end up in a situation where ... carriers are forced to charge each of those passengers more to try and cover their costs," he said.
In July 2024, Rex entered voluntary administration only to be kept afloat with a taxpayer-funded package of $40 million before being bought by American company Air T in December 2025.
Despite this, it was forced to end its Melbourne to Albury route.
Rex had already provided 40,000 seats a year to a market that only had 22,000 passengers - then Qantas added another 31,000.
The airline chose to redirect services to the Melbourne to Devonport service.
Now, no airline flies Melbourne to Albury, while Rex pulled all services to Devonport in June.
Across the business, some Rex routes barely covered operating costs, while others were forced to contribute to overheads, Mr Lodge said.
The airline has deals in place with the Queensland and WA governments, which subsidise operations in those states.
The Royal Flying Doctor Service told the hearing that regional airlines are critical to their operations.
Adequate air travel supported early intervention and helped patients avoid emergency treatment.
"Many of these flights will be to retrieve Australians who are critically ill and need urgent medical evacuation," federation chief executive Emma Buchanan said.
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