Tiger was barred from operating domestic flights last Saturday for a week by the Civil Aviation Safety Authority (CASA) over "serious and imminent" safety risks and the regulator now wants the suspension prolonged until August 1.
CASA said it will go to the Federal Court in Melbourne on Thursday to seek an extension to give it more time to study the risks and Tiger's response to its concerns.
In a statement, Tiger Airways Australia, a subsidiary of Singapore's Tiger Airways, suggested it would not oppose the move, while announcing that its Australian chief executive Crawford Rix will leave on July 31.
But it said it remained intent on returning to the skies after a grounding that is costing it US$1.6 million a week.
"Tiger Airways has been working constructively with CASA for the past five days to establish a plan for the resumption of our services and will not oppose the period of extension," the airline said.
"The airline remains committed to resuming services as quickly as possible."
It said it would refund fares to passengers holding reservations up until the end of the month and a spokeswoman added that the carrier "hopes our customers stand by us".
Rix, formerly at British low-cost carrier bmibaby, will be replaced by Tony Davis, the group president of Tiger Airways Holdings who was sent from Singapore to lead the talks with CASA.
Davis's former responsibilities will be carried out by Chin Yau Seng, executive director at the parent company who joined Tiger from Singapore Airlines earlier this week.
CASA grounded the airline after a flight approached an airport too low last week and after warning of concerns in areas including pilot proficiency, training and checking, and fatigue management.
The regulator's spokesman Peter Gibson said more questions were being thrown up as investigators went through Tiger's books.
"We have to make sure we fully understand the reasons why these problems have occurred -- if they are systemic problems, problems with process and problems with safety systems," Gibson said.
"The investigation is a big task and one that could not be done within the original one-week timeframe."
He stressed, however, that the intention was to have it completed by the end of the month.
It is the first grounding of an entire airline due to safety issues in Australia's history and while Tiger's shares in Singapore continue to slump, its main rivals in Australia are cashing in.
Virgin stock soared again Thursday with gains of more than 20 per cent so far this week, while Qantas has notched up a weekly gain of over nine per cent.
Sir Richard Branson, the largest shareholder in Virgin Australia, said he did not know if Tiger would fly again, but hoped it would.
"I think it's going to be tough to come back from that, but obviously for the sake of all the staff let's hope they manage to get their act together and be back in a month's time," he said in Sydney where he is attending a climate change conference.