Prime Minister Jacinda Ardern says she is "very disappointed" in Air New Zealand's handling of their controversial third-party contract with the Saudi military.
The company has been under fire since it emerged one of its contractors provided assistance to Saudi Arabian navy vessels, despite them blocking important supplies including food and water to Yemen which is in the middle of a humanitarian crisis.
On Tuesday, Ardern was asked whether she thought it was right for Air NZ to complete their contract.
"I don't think it is appropriate they had the contract in the first place," she told reporters.
"While there are certain requirements within New Zealand export control orders and so on, and a question mark over whether or not they have been in breach of those, regardless, it just doesn't pass New Zealand's sniff test and I think that they acknowledge that too."
Air New Zealand's current chief executive Greg Foran told The AM Show on Tuesday that he found out about the contract less than two weeks ago and it was shut down immediately.
"It is being suggested that, somehow, this is some sort of secret deal. I can assure you that that's not the case - it is a case of poor judgement.
"I did actually find out about this 10 days ago and took immediate action."
However, Ardern said she only found out on Monday.
"It's something we have only recently become aware of as a result of media inquiries. So it's very disappointing it's been so late in the piece we have become aware of it but even more so [it's] disappointing the leadership of Air New Zealand were in the dark as well."
She said the reason it took so long for her to find out was that she isn't informed about every media inquiry as she receives a "large number" every day.
"Obviously this has ramifications for New Zealand, it's reputation and that's why we are making sure we are across how it happened and how we can prevent something like this."
The contract was described as "horrific" by Green Party MP Golriz Ghahraman on Monday.
"New Zealanders will be heartbroken to find out [our] national carrier may have been involved in this way," she said.
Finance Minister Grant Robertson said he was "surprised and alarmed" to hear that a branch of the airline had been working with the Saudi Navy.
CEO Foran said a review has now been launched to find out how the contract was approved.
"We'll conduct that review and make sure we have the right sign-off procedures in place," he told The AM Show.
"I will make sure that I get involved and across that - we'll certainly be going back and reviewing what has occurred, and anything that is possibly coming down the pipeline, to make sure that we get these things right."
Former Air NZ CEO and current National MP Christopher Luxon, who was in charge when the contract went through, said he wasn't aware of the contract happening in his time.
"I have no recollection of it, it might've post-dated my time, but the bottom line is that these are really questions for Air New Zealand," he said.
"I haven't worked at Air New Zealand for some time but it's good to see that they've come out and admitted this morning that yes there was an error in judgment and they're wanting to do something about that."