Kiwi Regional Airlines has this afternoon announced that the operation will be wound up.
Air Chathams will purchase Kiwi Regional Airlines' Saab 340A aircraft and will absorb the aircraft and offer employment to the majority of Kiwi Regional Airlines' full-time staff and absorb them into its operations from the beginning of August.
Air Chathams runs a 5-aircraft operation with scheduled services between the Chatham Islands and Auckland, Wellington and Christchurch as well as a regular scheduled service between Whakatane and Auckland.
It has previously announced it would fill the gap left by Air New Zealand's withdrawal of services between Whanganui and Auckland, starting on 1st August 2016. It had planned to use an 18-seat Metroliner, but will now use Kiwi Regional's 34-seat Saab 340 on this route.
Kiwi Regional Airlines will continue to run its scheduled services until 30th July, and will then run the Whanganui to Auckland service for Air Chathams using Kiwi Regional's Air Operating Certificate until Air Chathams can move the aircraft onto its own AOC.
Kiwi Air passengers booked on flights after midday on July 30 will receive full refunds, or be offered alternative travel on flights before that date. All Kiwi Air charter flights with school groups in August and September will still operate.
Kiwi Air CEO Ewan Wilson said Kiwi had "a choice to either expand by adding a second aircraft to our own fleet, guaranteeing reliability of service, and splitting the very high compliance costs; or be absorbed into a larger player."
"From my point of view I am pleased our aircraft and flight staff will become part of the Air Chathams operation. We have had a formal maintenance agreement with Air Chathams since the start, and this will be an extension of that relationship."
In April Mr Wilson stepped down temporarily from his Hamilton City councillor duties and his role with Kiwi Regional Air to undergo surgery to manage a treatment injury stemming from cancer treatment in 2011 and 2013.
Kiwi Regional Airlines began operations late last year after gaining approval from the Civil Aviation Authority (CAA) in October.
The collapse of Mr Wilson's previous Hamilton-based airline Kiwi Air with a debts of $8 million in 1996 resulted in four fraud convictions and Wilson being banned from holding a directorship for five years.
Kiwi Regional Air was formed with investment from 2 Cheap Cars Limited which sold its shares to Andrew and Anne King in February.
A press release from Kiwi Regional Air said Andrew King, whose investments include King's Finance and King's Cars and who sits on the Hamilton City Council alongside Macpherson and Wilson, would not be part of the Airline's management team.