Australian domestic airfares have hit a five-year high, government data shows, as airlines draw a line under a price and capacity war.
Data from the the Bureau of Infrastructure, Transport and Regional Economics shows that in March, average economy fares reached their highest levels since May 2011 while business class fares were at their highest since November 2011.
Average on-sale economy airfares were at the highest level since November 2012.
The department conducts a monthly survey of airline booking websites and compiles an index based on the lowest available fare in each class on the 70 most popular routes in Australia.
BITRE's data shows discounting of economy seats has eased over the past year, with its index of on-sale fares (using a base of 100) growing 25 per cent from 56 points in March 2016 to 70 this month.
Economy and business class fares have grown only by a couple of points in the past year, but by 23 per cent and 50 per cent on the index since 2012 and 2013.
Ian Chitterer, vice president of investors service at ratings agency Moody's, said Qantas and Virgin Australia had both increased capacity substantially in 2014 in an effort to grow market share, which had lead to a fare war.
That was moderating now, and the carriers were also cutting flight frequency and the size of aircraft flying to Western Australia in the wake of the mining sector downturn, he said.
Australia's two major carriers have both said a soft domestic market had been stopping them from increasing fares, which was hurting their profits.
