Australia's airline safety regulator has grounded the local operations of Singapore's budget carrier Tiger Airways Holding Ltd over serious safety concerns, disrupting thousands of passengers at the start of the school holiday season.

The Civil Aviation Safety Authority (CASA) said on Saturday it has grounded the carrier's entire domestic fleet of 10 Airbus A320 aircraft for a week after it failed to adequately respond to safety concerns first raised in March.

This action has been taken because CASA believes permitting the airline to continue to fly poses a serious and imminent risk to air safety, the authority said in a statement on Saturday.

It was the first time a carrier's entire fleet has been grounded in Australia, CASA spokesman Peter Gibson said.

Tiger's domestic Australian flights are grounded until July 9 but flights to Singapore from Australia are not affected. It operates 14 Airbus A320 aircraft in Singapore, serving regional routes to other Southeast Asian countries, India and China.

Singapore Airlines controls about a third of the budget carrier but is not involved in its operation.

Separately, the Australian Transport Safety Bureau said on its website it was investigating an incident involving a Tiger Airways A320 aircraft that was reported to have descended below the published minimum altitude while approaching Avalon Airport, near Melbourne on June 30.

HOLIDAY SEASON

The authority issued a show cause notice to Tiger Airways Australia in March and subsequently imposed a number of conditions on the carrier.

These included actions to improve the proficiency of pilots, changes to fatigue management and improvements to maintenance control and ongoing airworthiness systems, it said.

Since that notice, there have been recent events that have raised concerns about the airline's ability to operate safely, the authority added.

If we've lost confidence in the safety of the airline, obviously we can't allow it to continue, Gibson said.

CASA said it might apply to the Federal Court for an extension of the ban to complete its investigation.

Tiger's affected passengers will be offered a full refund or deferred credit for any flights this week, the company said in a statement on its website.

Tiger Airways continues to cooperate fully with the industry regulator and safety underpins our operations at all times, it said.

The grounding follows weeks of disruption to flights within Australia caused by ash clouds from a volcano in Chile that erupted last month.

Australian Transport Minister Anthony Albanese told reporters on Saturday that the government regretted that the travel plans of some 40,000 passengers would be affected by the grounding but added that public safety was paramount.

The suspension coincides with the start of school holidays in several states and there were angry scenes at some airports where passengers complained they had not been informed about the grounding.

Other domestic carriers are helping to fly stranded passengers and rolling stoppages called by the union representing Qantas Airways engineers have been postponed to allow for extra flights to be laid on.

The Australian Licensed Aircraft Engineers' Association had planned several strikes between Monday and Wednesday to protest over pay and the airline's growing use of overseas maintenance workers.

Geoffrey Thomas, an aviation commentator, said there was a risk Tiger could remain grounded for some time.

Unless Tiger can do something very dramatic, very dramatic, in the next week, they'll be grounded for quite a few weeks, Thomas told Channel Nine news.

(Reporting by Morag MacKinnon; Additional reporting by Harry Suhartono in Singapore; Editing by Ed Davies / Daniel Magnowski)

Australia Safety