Unlimited flights into Australia would lead to lower prices, better quality services and more opportunity to travel, the Productivity Commission says.
The federal government's independent economic adviser called for the scrapping of caps on the number of flights foreign airlines can schedule, in a submission to a parliamentary inquiry spurred by Labor's decision to knock back extra Qatar Airways flights.
Unlimited flights should start with Brisbane, Melbourne and Perth before expanding to Sydney, pending a cost-benefit study.
Sydney was the only airport where the flight cap could provide the government leverage when negotiating bilateral air agreements with other nations, the commission said.
Lower travel costs and a greater choice of services and airlines would "likely be most immediately felt" for airlines from Qatar, Fiji and Hong Kong.
"Restrictions on access to aviation markets can impede competition between airlines, reducing the range and quality of services offered, discouraging innovation and increasing prices," the submission said.
"These effects are ultimately felt by the community, particularly passengers travelling abroad, tourism operators and users of international freight services."
Queensland Airports and Brisbane Airport both called for more flights to boost tourism and local economies through more international connections.
The federal government was also urged to be more transparent about the cost-benefit analysis it uses to balance the national interest against those of other groups.
Transport Minister Catherine King has not elaborated on what the "national interest" she used as the basis to deny Qatar a doubling of flights into Australia.
It has led to the opposition saying the government has a "cozy relationship" with Qantas after the carrier revealed it had lobbied against allowing the extra flights.
"The ultimate objective of this process should be to enhance the welfare of the Australian community as a whole rather than to protect or promote any particular group, industry or commercial interests," the Productivity Commission said.
"This assessment should include the benefits to the Australian community arising from lower airfares or access to a wider range of outbound travel destinations."
An imbalance in travel agreements in the Middle East had led to 168 flights per week from the United Arab Emirates compared to 28 from Qatar, Sydney Airport said.
But only 84 of the 168 permitted flights were being flown while Qatar was operating at capacity, stalling the recovery from the Middle East market after the COVID-19 pandemic, it said.
"With 50 per cent of weekly permitted flights from the UAE not being utilised, while Qatar is prevented from increasing their capacity, consumers are paying the price with less choice and ultimately higher airfares," Sydney Airport Corporation CEO Geoff Culbert said in the submission.
The Australian Chamber of Commerce and Tourism added that "by denying Qatar Airways' application, the government has restricted the number of tourists who can visit Australia and, effectively, inflated the cost of airfares".
"This is a significant deterrent for tourists to travel to Australia," it said in its submission.
Carriers such as Qantas were unlikely to return to full international capacity until at least March, meaning it was "difficult to foresee an easing in prices in the immediate future without increased competition", the chamber's tourism arm said.
Inbound tourism, trade, business and investment opportunities were enhanced with daily connections to Canberra on Singapore Airlines and Qatar, Chief Minister Andrew Barr wrote in the ACT government's submission.
Those flights opened markets in Europe, Asia and China.
Providing incentives for large carriers to fly into more regional cities to boost local economies could be achieved with additional flight slots at major capital city airports being contingent on offering gateway flights, Mr Barr said.
