Let's not be naive, RFDS are not dragging any prices up.
Lester,
The RFDS is a far more expensive operation to run than a purely commercial one such as Pel Air. This is due to the sheer quality of the RFDS operation. The only other operation with comparable quality (and comparable operating costs), I would suggest, would be the RAAF!
THERE IS NO WAY THE RFDS CAN DO ANYTHING MORE CHEAPLY THAN AN OUTFIT LIKE PEL AIR.
I would suggest that the RFDS have not really undercut the commercial operators, but rather, creative (government) accounting has made it look that way.
A healthy dose of politics was involved in the Queensland decision, I believe.