High fares deliver lift to airlines

DOMESTIC airfares hit a fiveyear high in the first three months of the year, as airlines cut back on flights to Western Australia.

Ratings agency Moody’s said industry data shows an index measuring discount economy fares hit a five-year high in the March quarter and business and restricted economy fares were at even longer historical highs.

Prices have risen partly because airlines have cut the frequency of flights, and the size of aircraft, flying to Western Australia, which has a softer economy than the eastern states.

“The airlines’ strategy reflects a contraction in capital investment in the mining and resources sector, much of which is based in Western Australia, over the past three years,” Moody’s said.

Qantas and Virgin Australia should get a revenue boost from higher airfares, as domestic operations are their largest divisions.

“The growth in domestic airfares and the likely moderate growth in traffic volumes, based on our observations of the first six months of fiscal 2017, will drive an improvement in the airlines’ revenue in the second half of fiscal 2017,” Moody’s said.