Aviation regulators grounded budget carrier Tiger Airways Australia Saturday because it posed a "serious and imminent risk to air safety", throwing the travel plans of thousands of people into chaos.
Australia's Civil Aviation Safety Authority (CASA) said Tiger's domestic services had been suspended with immediate effect following a series of incidents that had raised questions about its airworthiness.
The first grounding of an entire airline in Australian aviation history, the ban is for an initial five working days, after which officials can apply for a court-enforced extension to allow for further safety investigations.
A subsidiary of Singapore's Tiger Airways, Tiger Australia operates about 60 domestic flights a day, moving up to 9,000 passengers.
Transport Minister Anthony Albanese said about 35,000 people would be affected by the week-long ban, which he described as an "extremely regrettable" but necessary step.
CASA said it was considering applying for an extension and warned that Tiger's licence to fly was at stake, though that was "not so much in contemplation at this point".
"What we're looking at now is do we need more time to work on what response we're going to have to this situation, and if we do how much time, and putting an argument to the court to get that time," CASA spokesman Peter Gibson told AFP.
The engineers' union said Tiger was likely to remain grounded for "weeks".
Australian authorities have been closely monitoring Tiger and issued the airline a "show cause" notice in March threatening to vary, suspend or cancel its licence over safety worries.
It was ordered to improve the proficiency of its pilots, boost pilot training and checking procedures, address fatigue management issues and ensure "appropriately qualified people fill management and operational positions".
CASA also ordered improvements to the airline's "maintenance control and ongoing airworthiness systems."
Barry Jackson, head of the pilots' union, said the move was a "wake-up call" for the industry and backed their claims that budget airlines were eroding national safety standards.
Tiger said the suspension related to "two recent operational incidents" reportedly involving aircraft flying dangerously low -- and it would cooperate fully with CASA.
Budget rivals Jetstar and Virgin both promised to lay on extra flights to help stranded passengers and said they would offer special fares to those hit by the Tiger ban. Flag carrier Qantas also offered discount flights.
Qantas engineers called off strike action scheduled for next week at the request of the government to ensure disruptions were kept to a minimum.
The ban comes at a fraught time for Australia's aviation sector, with industrial unrest brewing at Qantas and airlines still reeling from the unprecedented chaos caused by Chile's ash cloud.