This follows the announcement that the government is bringing in a Chinese-run service, with the Chinese government providing a plane and other services free of charge.
Air Chathams says it can't compete against a subsidised service, especially in such a small market as Tonga, so they're ending their flights in March.
Tonga's acting prime minister, Samiu Vaipulu, tells Bruce Hill the government just wanted to introduce competition in order to lower domestic fares, which at the moment can see a flight from the main island of Tongatapu to Vava'u being more expensive that a ticket to New Zealand.
Presenter: Bruce Hill
Speaker: Tonga's acting prime minister, Samiu Vaipulu
VAIPULU: We didn't send Air Chathams away, it's their own free choice initially when they first started back in 2007, they said that competition would make the markets healthy, but it contradicts what they're saying now. But the fact is the government is not running an airline and we are not giving the aircraft free. We will be leasing out aircraft.
HILL: Will it be a new airline or will it be a new company?
VAIPULU: There is a company in place which will start operating on the 4th. March. Chathams will be pulling out on the 2nd. which is a Saturday, and the new airline should start on the 4th, and we've got two other options.
HILL: So will there be any disruption to say the tourist trade. Will tourists still be able to get from Tongatapu to Vau'vau with no trouble at all?
VAIPULU: No trouble at all, no trouble at all. This is our low season here in Tonga.
HILL: Are you disappointed at their decision? Do you think that they could have actually stayed and competed against this new aircraft?
VAIPULU: They could have just stayed and compete, but it's their own decision to pull out.
HILL: Has there been any problems with Air Chathams Air Service in the years that it's been operating domestically in Tonga? Have they provided a reasonable service?
VAIPULU: Well, there has been some some disappointments from the travelling public here. But it's an airline, it's normal with airlines. What our government wanted to do was have a competitor in the market.
HILL: It's a pretty small market place, Tonga domestically, I mean there's only about just over 100,000 people in Tonga, widely scattered, so there'd be quite a bit of cost involved in, especially running smaller aircraft to get to the two Nius and Awia. Noone's going to get rich running an airline in Tonga, are they?
VAIPULU: It is small, but what Chathams said in the beginning that the market would be more healthier when we have competition. And I think it all depends on the type of equipment they will use.
HILL: Well, speaking of that, the plane that the Chinese are going to make available for lease. My understanding is that it's actually too big to land on Eua or the Niuas. So how are Awia and the Nuias going to be able to get air transport services if this plane's too big to land?
VAIPULU: Eh, the new airline is starting with an aircraft, which is a 17 seater. She can land at Eua , Niuas. There would be no problem there.
HILL: So how's the Tongan public responded to this news that Air Chathams pulling out and this new airlines going to start up. Are they thinking this is a good thing, do they think they might be a better service and lower fares or will it be about the same as they got from Air Chathams?
VAIPULU: The fares will definitely be cheaper and what the Ministry would like to do is to still have a say into air travel.
HILL: What's the Chinese government involvement in this whole project? What are they doing for Tonga?
VAIPULU: Well, with the bigger aircraft, that's a 52 seater. It's a grant so government could lease the aircraft to which ever airline that would still be operating here.
HILL: Do you have a name for this new airline? Is it going to be officially a government airline or a state-owned enterprise? What's it actual sort of status?
VAIPULU: No, no, it's not a government airline and it's not a state-owned enterprise. It's a private company.
HILL: What's it's name going to be?
VAIPULU: Real Tonga.
HILL: If Air Chathams was providing a fairly reasonable service, isn't it a bit risky perhaps bringing something new in which might not necessarily be an improvement on what you had?
VAIPULU: At the moment, the public like the flights from Tongatapu to Vauvau, which I'm in Vauvau now. It's cheaper to go to Auckland than coming to Vauvau.
HILL: It's actually cheaper to fly from Tongatapu to Auckland than it is internally from Tongatapu to Vauvau?
VAIPULU: Yes. It is now it's 326 from Tongatapu to Vauvau.
HILL: And how much is to from Tongatapu to Auckland?
VAIPULU: Well, when you have all these online fares, sometimes it gets down to 200.