Wellington-based Vincent Aviation's Australian operation has been put in receivership in what the airline says is a bid to shore up its New Zealand business.
Vincent ran a fleet of nine leased aircraft and employed 80 people in Australia where it had set up a subsidiary largely to service the mining industry.
Chief executive Peter Vincent said the company had spent "millions of dollars" on the operation since 2001 but demand had dropped and attempts to find a buyer had failed.
"We've had three prospective purchasers fall through so in the end had no option but to put the Australian arm of the company into receivership. It wasn't forced on us by a bank or anything."
Vincent said some passengers who had paid in cash would become an unsecured creditor but that would be a "very small proportion" of passengers would be affected.
"The business has been running at a loss for some time and it got to the stage where we couldn't continue to prop it up. Trading conditions had become increasingly difficult."
He blamed the slowdown in mining and also high compliance costs.
"We're not the first airline that has failed and won't be the last probably.'
Vincent's Australian operations were based in Darwin and had just been awarded a scheduled passenger route from Sydney to western New South Wales.
In New Zealand the company flies the Life Flight Trust air ambulance, provides charter aircraft for Air New Zealand and private operators.
He said the failure in Australia had put pressure on the business.
"I'd love to say it doesn't but the situation in Australia has put a strain on New Zealand operation for a long time which we're trying to alleviate. We're hopeful that without that loss that the New Zealand company can continue. "
He said the New Zealand operation was profitable.
"It is separate and the reason we've done this is to ensure the continued viability of the New Zealand operation. It's going to take a little while for people to get confidence back in us."
Vincent was set up in 1990.