Kiwi Regional Airlines has been sold to Air Chathams, meaning the end of a Dunedin to Nelson air link and the loss of at least four part-time jobs in Dunedin.
The end of the airline has come less than a year after it was launched.
While he would not reveal the financial outcome for shareholders, KRA chief executive Ewan Wilson said no creditor would be unpaid.
Mr Wilson would also not rule out getting involved in the airline industry again, despite his second foray ending within its first year of operation.
Kiwi Regional Airlines was announced early last year, with plans for a Dunedin-Queenstown-Nelson and return service, seven days a week.
The initiative of Mr Wilson, a former Dunedin man behind the failed Kiwi Air which collapsed in 1996, it launched on October 27 last year.
The Queenstown leg of the route was dropped immediately, due to a lack of ticket sales.
The airline added an extra two flights a week from Dunedin to Nelson in March, a move Mr Wilson said at the time should push the business into profitability.
The Nelson flight linked with Kiwi Regional Airlines' flights to Hamilton and Tauranga.
Mr Wilson said yesterday the decision to sell the airline was made at a board meeting on Wednesday.
He said his position was always that to be sustainable he needed two aircraft in the fleet.
There had been periods when the Saab 340A the airline used was grounded for three or four days, causing "absolute havoc for us''.
The airline had considered crowd funding for a second aircraft and other options, and the management team had presented that idea to the shareholders as an option.
The alternative was an opportunity to sell to an airline that was expanding, and that had been the shareholders' decision.
There were two full-time engineers in Dunedin, and they would be offered jobs with Air Chathams, although that would mean moving to Auckland.
KRA would continue to operate the route network until July 30.
After that date, Air Chathams would use the Saab 340A and most staff to launch a new service between Auckland and Wanganui, which it had taken over from Air New Zealand.
Kiwi Airlines would operate that service for a month until Air Chathams took over.
Mr Wilson said the only negative was Air Chathams would not continue the Dunedin to Nelson service.
"I'm pleased as shareholder.
"I'm disappointed as a chief executive, because I felt we've built something quite special and I would have liked to have expanded.
"I guess we realised we had come to a crossroads where we needed a second aeroplane, or we needed to be absorbed.
"As fate would have it, we were lucky enough to have been absorbed.''
KRA passengers booked on flights after noon on July 30 would receive full refunds, or be offered alternative travel on flights before that date.
All of KRA's charter flights with school groups in August and September would still operate.
Air Chathams chief executive Craig Emeny said the company was "delighted'' to have bought the aircraft.
"Kiwi's pilots and engineers will make a welcome addition to the Air Chathams family.''
KRA was formed with investment from 2 Cheap Cars Ltd, which sold its shares to Andrew and Anne King in February.
Other shareholders are Mr Wilson, William Wilson and Nicole and Guy Domett.
Mr Wilson said the Dunedin-Nelson flight had gone because Air Chathams needed the Saab to operate its Auckland-Wanganui flight.
Asked if it was the last time he would get involved in the airline industry, Mr Wilson said he was 49 years old and still had "quite a lot to contribute''.
"Setting up an airline is quite a challenging thing to do, and I've done it twice.
"The second time I've sold it.
"Would I do it again? I'm not going to rule that out.''
