Kiwi chief executive Ewan Wilson said the company had been ''at a crossroads'' with the need for a second aeroplane.
He told the Otago Daily Times he was disappointed as a chief executive, but pleased as a shareholder with the outcome.
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 after intense competition, it launched on October 27 last year, though 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 today the airline had already told staff of the sale.
Kiwi would continue to operate the current route network until July 30.
After that date, Chatham Air would use the company's Saab 340A aeroplane and all staff, apart from two, to launch a new service between Auckland to Wanganui, which it had taken over from Air New Zealand.
Kiwi Airlines would operate that service for a month until Chatham Air took over.
''We'll then be totally absorbed into Air Chatham.
Mr Wilson said it was good the airline had been ''purchased and absorbed''.
The only negative was Air Chatham 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 cross-roads 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.''
Kiwi Regional Airlines passengers booked on flights after midday on July 30 would receive full refunds, or be offered alternative travel on flights before that date.
All of Kiwi Regional Airlines' 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 Kiwi Regional Airlines' Saab 340''.
''The aircraft is a respected aircraft type in New Zealand and has been very well maintained.
''Kiwi's pilots and engineers will make a welcome addition to the Air Chathams family.''
