The Chief Executive of Fly Niu Airlines, Atu Finau, says it is exploring legal avenues after the Tongan government failed to give it a licence.
The Civil Aviation Department has also announced that Peau Vava'u will be the carrier to get the only licence for domestic flights.
Peau, also known as Air Waves, has a 59-year old plane while Fly Niu used a 4-year old plane.
Mr Finau says they are now looking at their legal options and he's confident the decision can be overturned.
"I'm very optimistic. We believe we are doing actually everything right, we are doing what we believe it's what should have been happening."
Air Waves of Vava'u is being run by Pion Air from New Zealand and a Tongan agency owned by the Crown Prince Tupouto'a.
