Tiger Airways shuts down Indonesian budget airline Mandala

Tiger Airways, the unprofitable low-fare carrier part-owned by Singapore Airlines, is shutting down its Indonesian venture Mandala, which will stop flying from July 1.

Mandala was unable to sustain its operations and the airline's key shareholders decided to cease funding, Tiger Airways said in a statement to the Singapore stock exchange on Wednesday.

Tiger Airways has been grounding planes and cancelling aircraft orders as part of a restructuring after mounting losses led largest shareholder Singapore Airlines to name a new chief executive for the low-fare airline.

The efforts are symptomatic of the challenges budget airlines face in Southeast Asia, where competition among half a dozen carriers has pushed fares down. "This is definitely an example of the very challenging conditions that carriers face in this region," said Brendan Sobie, a Singapore-based analyst at Capa Centre for Aviation. "Low-cost carriers are definitely in a vulnerable position."

Mandala's financial results reflected the challenges it was facing in the difficult operating environment, Tiger Airways chief executive Lee Lik Hsin said.

Economic growth in Southeast Asia has enabled more people to fly for the first time, prompting budget carriers to start and order hundreds of aircraft. Singapore Airlines has set up two budget airlines - Tiger Airways and Scoot. It owns 40 per cent of Tiger Airways and all of Scoot. Low-fare airlines account for more than 50 per cent of seats in the city.