Tigerair pulls funding on Mandala, budget carrier to cease operations from July 1

Loss-making Indonesian budget carrier PT Mandala Airlines will cease operations from July 1, its key shareholder Singapore-based Tigerair said Wednesday.

Tigerair said it and other key shareholders had "vigorously explored various options in recent months" to keep the airline flying but concluded that this would not be sustainable

"As a result, they have decided to cease funding the airline," Tigerair said in a statement.

"Mandala's financial results reflect the challenges that it is facing in the difficult operating environment," added Lee Lik Hsin, group chief executive of Tigerair.

Mandala flies mostly domestic routes as well as a few international hops, including from the Indonesian city of Medan to Singapore.

Affected customers will be offered different flights or ticket refunds.

Mandala ceased operations once before, in January 2011, after it was grounded by heavy debt.

However, it was able to return to the skies in April 2012 after completing a financial restructuring in which the Singapore budget carrier became a key investor with a 33 per cent stake.

Tigerair raised its stake in Mandala to 35.8 per cent in September 2013.

"The decision to pull out of Mandala will enable Tigerair Group to focus on its turnaround strategy," Tigerair said.

Tigerair in May said its net losses widened to Sg$223 million (A$190 million) in the year ended March, from Sg$45.4 million (A$38.7 million) a year ago, due to losses in regional operations.