The State Government will consider capping airfares on the key Perth-to-Exmouth route after Virgin Australia announced it was pulling out of the service, leaving Qantas as the sole operator.
Virgin's shock announcement is seen as a body blow to tourism in one of WA key's destination markets.
The airline said this week that after an extensive review, it could no longer "sustain unacceptable losses" on the route.
It had advised the Department of Transport its three-services-a-week operation would end on October 13.
The Perth-Exmouth route was deregulated in 2011 to allow two airlines to operate.
But Tourism Council chief executive Evan Hall said the deregulation of regional aviation services had been bad news for regional towns, particularly Exmouth and Monkey Mia.
"We call on Qantas to maintain current services to Exmouth and keep their fares as low as possible," he said. "Any big fare rise from Qantas would have a negative impact on the local community and tourism industry.
"The Department of Transport should re-regulate the route to guarantee minimum services for Exmouth."
Transport Minister Dean Nalder said the State Government was committed to maintaining an adequate air service to regional towns such as Exmouth.
He said the department would continue to monitor the route and liaise with key stakeholders to investigate future options for the Perth-Learmonth route.
"We may consider the possibility of inviting another operator on to the route through an expression-of-interest process," he said.
"If this eventuates, and a second operator is awarded rights to provide services on the route, direct airline competition will continue.
"Should QantasLink become a sole operator on the route, the maximum airfare would be capped and any schedule changes would require approval from the State Government."
Mr Nalder said the Government had launched a review of regulated air routes in WA and a discussion paper, with recommendations for each route, would be out for public comment soon.
Mr Hall said if the Exmouth route, with about 90,000 passenger movements a year, could not be sustained, other routes would certainly struggle.
"Those arguing for deregulation of the Perth-Albany route (about 50,000 passenger movements) are lining up to commit one of the worst 'own goals' in the town's history," he said.