Tiger Airways has been grounded for one week by Australia's air safety watchdog, effective immediately.
The Civil Aviation Safety Authority has ordered the airline to suspend all flights until July 9 while it investigates two recent operational incidents.
On Thursday night, a Tiger A320 from Sydney approached Avalon Airport, near Geelong, below the minimum safe altitude as it was coming in to land. This occurred on the aircraft's second attempt at landing, after the first attempt was abandoned because of a higher-than-expected tail wind.
It was the second time in a month that a Tiger flight had dropped below the minimum safe altitude on an approach to an airport. The first incident occurred when a flight from Brisbane approached Melbourne Airport on June 7.
CASA's grounding of Tiger Airways last night comes after it served a "show cause" notice on the airline in March following concerns about safety and maintenance procedures.
In a statement released overnight, Tiger said it would continue to cooperate fully with the industry regulator.
"Safety underpins our operations at all times," it said.
"Tiger Airways is committed to resolving the issue, assisting CASA and to resuming services as soon as possible."
The airline was doing all it could to minimise passenger disruption, especially to those people whose flights had been cancelled over the coming week.
It advised passengers booked on flights before 6am on July 9 not to travel to the airport.
"They will be offered a full refund or credit for deferred travel," it said.
It is thought to be the most extreme action taken by CASA against an Australian airline since it grounded Ansett's fleet of 767s because of safety concerns in 2000 and 2001. Ansett collapsed in September 2001.
The suspension order does not affect Tiger Airways' Singapore services, which will continue to operate as normal.
Tiger will provide more information to the media at 3pm today.
It says it has added extra staff to its call centre to deal with the volume of calls expected.
The grounding is certain to cause chaos at airports around Australia as passengers arrive to find their flights have been cancelled.
Tiger Airways operates a fleet of 10 Airbus A320 aircraft in Australia.
The low-cost airline, which bases its business model on European cut-price airlines such as Ryanair, is owned by a Singapore-based parent company whose largest shareholder is Singapore Airlines. It began operating in Australia in November 2007, with its main base in Melbourne.
The Australian Transport Safety Bureau is also investigating the two low-flying approaches that occurred in recent weeks.
The suspension of Tiger's licence to fly follows several months of speculation over why CASA issued the show cause notice in March.
Fairfax Media has previously reported that CASA's concerns related to the supervision and control of maintenance practices.
It was also revealed yesterday that Tiger would scrap its Adelaide-Sydney services from August.