A Chinese gift of a free aircraft to Tonga has forced a New Zealand airline operator to quit the Pacific kingdom.

China has given Tonga a new 60-seat Xian MA60 turbo-prop aircraft which the government plans to operate in competition with the New Zealand-owned Chathams Pacific Airline, which, with five aircraft, is the only domestic carrier in the kingdom.

Tonga has a long history of failed aircraft ventures, including 11 previous domestic carriers.

Chathams Pacific general manager Craig Gillespie said today that the company had told the Tongan government it will end all its services on March 2.

The airline's owner, New Zealand businessman Craig Emeny, said in a letter to the government: "I have now lost business confidence in Tonga due to the Government's attitude towards my airline and I won't continue providing the domestic air services."

Gillespie said the decision was made when the company learnt in local media last month that the Chinese aircraft would arrive in June and start operating in competition.

He said this meant Chathams Pacific would have to operate at a loss during the first six months of the year, only to have the new airline arrive and take over the peak tourist services.

The company was not prepared to take the risk, as any big losses in Tonga would impact on its Air Chathams services to the Chatham Islands.

Chathams Pacific was started in 2007 after the kingdom was left without a domestic airline.

Tonga's main tourist destination, Vava'u in the northern end of the archipelago, can only be reached by domestic services from the capital Nuku'alofa. Vava'u is popular with New Zealand tourists for its whale watching and yacht chartering business.

Emeny said Chathams Pacific was willing to charter its operations to the Tongan government from March until the arrival of the Chinese aircraft. The company would not, however, carry any losses on the service which would have to be the Tongan government's responsibility.

"An alternative needs to be put in place as soon as possible to retain confidence in the tourist sector. The bookings for the peak season later in the year are intensifying right now," Emeny wrote.

Tonga has also asked China to give it a 17-seat Harbin Y-12 aircraft to service smaller islands.

The MA60 is described as a short take-off-and-landing aircraft designed for rugged conditions.

The United States Federal Aviation Administration has refused to certify it, and it mainly operates in Third World countries where they are sold heavily subsidised or given away free.

In May 2011, an MA60 crashed in Indonesia killing all 27 people aboard.