Qantas likely to oppose any plans to open northern Australia to foreign airlines. Picture: Marcus Graff

Foreign airlines could be given clearance to fly passengers between domestic airports in northern Australia under a radical plan being considered by the Abbott Government.

The West Australian can reveal that Cabinet’s budget razor gang, the expenditure review committee, has discussed allowing international carriers to fly direct to airports north of the Tropic of Capricorn and then fly freely between northern airports.

An “open skies policy” for northern Australia would potentially allow cut-price foreign carriers to fly tourists to Broome, Darwin, Cairns and Townsville, as well as allowing Australians to have cheaper tropical holidays.

But the idea would also have strong attraction for mining and agriculture companies who want to shift workers and produce across Australia and into Asia more cheaply.

Karratha, the centre of iron ore and LNG activity, could also benefit from an open skies policy for northern Australia, with foreign workers being flown directly to the Pilbara rather than via Perth or Eastern State hubs.

It is understood that Trade Minister Andrew Robb and Treasurer Joe Hockey have been supportive of the idea inside ERC.

Transport Minister Warren Truss, perhaps mindful that domestic carriers including Qantas and Virgin would be intensely hostile to the idea, is more sceptical of the proposal.

Qantas reacted angrily to the plan, telling The West Australian foreign carriers would be operating as “de-facto domestic airlines”.

“Allowing foreign carriers to operate as de-facto domestic airlines would have far-reaching, unprecedented and damaging consequences for Australian aviation,” a company spokesman said.

“It would change the economics of already commercially marginal routes in some parts of northern Australia, which a number of regional carriers have been serving for decades.”

“This would be the thin edge of a very large wedge.”

Prime Minister Tony Abbott is described as a “fence sitter” on the issue, listening to debate on the issue within Cabinet and ERC.

Shadow transport minister Anthony Albanese questioned the need for any new aviation rules for northern Australia.

“As a result of reforms in the 2009 Aviation White Paper there are already incentives to fly into northern entry points such as Darwin, Broome, Cairns and Townsville,” Mr Albanese told The West Australian.

“Australia has the most open domestic aviation system in the world and any proposed changes would need to be examined carefully as they may endanger existing provision of air services.”

Northern Territory chief minister Adam Giles is said to be very keen on opening up northern Australia to foreign carriers, believing it could be used to substantially increase air traffic between Darwin and Sydney but there are concerns that opening up access to Darwin could affect Northwest Regional Airlines’ business.

Such a historic change in aviation policy would put the Abbott Government on track for a major fight with Qantas and Virgin.

A major report handed down by the Government last year into the development of northern Australia recommended the opening up of air routes to international carriers.

The Northern Australia Green Paper found there was limited interstate transport services across the north, meaning it was virtually impossible to fly directly within the region without having to travel to a major airport in the south first.

The paper said current restrictions meant foreign carriers had to carry extra fuel, reducing the amount of freight they can haul.

“This challenge is particularly difficult for international flights that need sufficient fuel to reach another airport with appropriate facilities,” the Green Paper said.

“Some stakeholders suggest that international carriers should be permitted to move passengers between domestic airports in the north.”