Business

Tiger Airways grounding may be extended

A passenger walks past the departure screen as airlines cancel flights due to volcanic ash at Melbourne Airport
Image caption Tiger Airways moves about 9,000 passengers a day on 60 domestic flights in Australia

Australia's Civil Aviation Safety Authority (CASA) has said it is seeking an extension of the grounding of Tiger Airways flights until 1 August.

CASA said the extension was needed as its investigations will not be completed by the end of the initial five-day suspension period.

Meanwhile, Tiger Airways announced that Crawford Rix, the chief executive of its Australia operations had resigned.

The carrier's aircraft were grounded in Australia on 2 July on safety concerns.

Tiger Airways said in a statement that it would not oppose the extension.

The budget carrier also announced that it had asked Tony Davis, the chief executive of its parent company, Tiger Airways Holdings, to take charge of the troubled Australian operations.

Mr Davis has been leading the carrier's talks with CASA since the grounding of its fleet.

The airline's Australian planes were grounded after an aircraft approached an airport too low as it came into land last week.

CASA said the carrier had been under a safety review by the regulator because of previous lapses.

Uncertain future?

Tiger Airways is part owned by Singapore Airlines and operates flights to various destinations in Asia Pacific. Its non-Australian operations have not been affected.

An extension of grounding will not only cause immense financial loss to the carrier, it has also raised concerns about the future of the company's Australian operations.

Analysts said the grounding may force the carrier to reconsider the way it operates.

"Tiger will now have to weigh its options of either continuing to base its fleet in Australia, and face the uncertainty over when it can resume operations but lose two million Singapore dollars ($1.6m; £1m) per week, or scale down its operations in Australia and exit the business," said Rigan Wong of Citigroup.

Singapore-based brokerage DMG & Partners estimated that the company may lose as much as S$32m as a result of the grounding.

DMG also warned that the loss of reputation may also have an impact on the earnings of the carrier.

"There could be further downside risks to earnings from higher operational costs in terms of staff costs and higher marketing costs in an attempt to repair its reputation," it said.

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