Embattled budget carrier Tigerair is grounding its loss-making Indonesian affiliate as part of a turnaround plan to dig itself out of the red.
Tigerair Mandala, 36 per cent owned by the low-cost carrier, will cease operations on July 1.
The decision to pull the plug on Tigerair Mandala follows failed takeover talks with Malaysia's AirAsia and Indonesian carrier Citilink.
Tigerair said yesterday that Mandala's shareholders, including the Saratoga Group and PT Cardig, had explored various options in recent months but concluded that the carrier would not be able to sustain its operations. "As a result, they have decided to cease funding the airline," Tigerair said.
That will leave Tigerair with two carriers - Tigerair Singapore, which is 100 per cent owned by the Singapore parent company, and Tigerair Australia, in which the group has a 40 per cent stake.
Mandala's losses reflect the challenges of a difficult operating environment, with yields falling as a result of fierce competition and overcapacity.
The carrier's plight has affected its parent significantly.
Battered by bruising competition, Tigerair reported its biggest-ever loss of $223 million in the year to March 31. It lost $45.4 million in the 12 months before.
Indonesia remains an important market for Tigerair, said group chief executive Lee Lik Hsin.
"We will continue to maintain an active presence through Tigerair Singapore," added Mr Lee, a Singapore Airlines executive who took over Tiger's top post about a month ago.
SIA is Tigerair's largest shareholder with a 40 per cent stake.
Tigerair Mandala will operate its last Hong Kong-Bali service on July 1. Customers with bookings after that will either be moved to other flights where possible or given refunds.
This article was first published on June 19, 2014.
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