Rotorua will lose its transtasman international air service from the end of April.
Air New Zealand has terminated its twice-weekly Rotorua to Sydney flights after Rotorua District Council decided to stop paying the airline to continue the service.
Since 2009 the council has paid $9.13 million to Air New Zealand as part of a "joint venture marketing" programme to keep the flights in Rotorua.
The last direct flight to Sydney will be on April 25.
Rotorua mayor Steve Chadwick said it was not an easy decision to make, but it was the most financially prudent course of action.
"While it's controversial, it was a decision we felt at the council we had to make unanimously.
"It meets our criteria of being effective and efficient and transparent ... and making decisions that make us go forward with economic growth in our community," she said.
Councillor Glenys Searancke had been opposed to the Air New Zealand payout for years and said the council's funding of the flights should have stopped some time ago.
"If it was not commercially viable then it should have been stopped.
"Ratepayer money going into a bucket for Air New Zealand was just wrong, it should never have been subsidised.
"I'm not happy we have lost the flights, but we have to face the facts, it was not economically viable," she said.
Rotorua Airport chief executive Alastair Rhodes said it was the right decision and would allow the airport to focus on delivering better services and a greater return to Rotorua and the wider Bay of Plenty.
"The New Zealand aviation market has changed significantly in recent years, resulting in airlines shifting transtasman flights away from regional hubs to major ports. Rotorua's close proximity to Auckland means it's also difficult for the regional transtasman route to be justified with airlines." He said it was up to the airlines to decide where and when they wanted to fly "and obviously this must be commercially sustainable".
Mr Rhodes said there would be changes for staff working in customs and security, but was not sure if anyone would lose their jobs.
"We'd love to maintain transtasman flights, but airlines are not making money on the transtasman sector."
He said he would focus on Rotorua's North to South Island tourism flows where the airport had a competitive advantage.
Since the flights were established in December 2009 98,578 passengers have used the service.
An Air New Zealand spokeswoman said the route was not economically viable without the council's subsidy and the airline had no plans to operate any international services out of Rotorua.
The spokeswoman said the airline would concentrate on its domestic services out of the city with increased capacity on its Rotorua-Auckland service.