Aviation authorities in Australia have extended a ban on flying for thousands of light aircraft already grounded by contaminated fuel.

The authorities say the scale of the fuel contamination is probably the worst experienced anywhere in the world and it will keep at least 5,000 aircraft grounded for another week.

The ban threatens to put dozens of light aircraft operators out of business in what is normally the busiest time of the year in Australian aviation.

All recreational and flying training has stopped, most charter flights, many outback air services, mail deliveries and parts of the Royal Flying Doctor Service have been grounded since engineers discovered the first signs of fuel contamination three weeks ago.

Catastrophic effects

Now tests developed to detect the contamination have revealed a second substance in aircraft fuel that is equally capable of causing sudden and potentially catastrophic engine failure.

Scientists say they can't identify it. So authorities have ordered all piston-engined aircraft to remain on the ground during another week of laboratory testing.

The Mobil Oil Company, which distributes the fuel, has offered more than $10m in compensation to the aircraft industry, but many operators say they are planning legal action to recover much greater sums they have lost in the crisis.