Loss-making budget airline Virgin Australia Holdings Ltd (VAH.AX) will buy full control of its ailing 60 percent-owned Tiger Australia Airways business for just A$1, signaling plans to cut a bloated fleet that has hobbled turnaround efforts.

Announcing its plan to buy 40 percent of Tiger Australia from Singapore-listed Tiger Airways Holdings Ltd (TAHL.SI), Virgin said on Friday it will cut growth in Tiger Australia's fleet to cope with "ongoing subdued consumer demand in the Australian domestic market".

Virgin Australia bought its original 60 percent stake from Tiger for A$35 million ($30.74 million) just 14 months ago.

Australia's domestic aviation market has been under intense pressure as local carriers, including Qantas Airways Ltd (QAN.AX), engaged in a bitter price war just as demand fell amid a faltering economy. After racking up over A$3 billion ($2.63 billion) in combined losses in the 2013-14 financial year, Virgin Australia and Qantas declared they would start cutting available seats to drive tickets higher.

The deal also came as Tiger Airways on Friday reported heavy losses of its own, and said Singapore's flag carrier Singapore Airlines Ltd (SIAL.SI) would raise its stake to 55 percent from 40 percent currently.

"Under this proposed transaction, we will benefit from the economies of scale and achieve profitability ahead of schedule by the end of 2016," Virgin Australia chief executive officer John Borghetti said in a company statement.

Reporting its annual loss in August, Virgin declined to give profit guidance, citing uncertainty about the Australian aviation market.

For the year, Virgin's stake in Tiger generated losses of A$46 million. For the quarter to September 30, Virgin's losses from Tiger grew 20 percent to A$11.6 million in the quarter to September 30.

On Friday, Tiger reported a loss of S$182.4 million ($143 million) for the three months to end-September, largely due to a S$99.3 million charge for "the sublease of surplus aircraft". A year ago, Tiger booked a net profit of S$23.8 million for the same period.

Tiger also said it was proposing a rights issue of up to S$234 million, with Singapore Airlines agreeing to subscribe to up to S$140 million of those rights shares.

Ahead of the rights issue, Singapore Airlines will turn convertible securities its holds in Tiger into ordinary shares, boosting its stake to 55 percent from 40 percent and making the budget carrier a subsidiary of the city-state's flag carrier.

Virgin Australia shares were unchanged in morning trading in Sydney. In Singapore Tiger's stock fell as much as 10 percent in early trade to an all-time low of S$0.290, whilst the benchmark Straits Times Index .FTSTI was flat.