Kingston Flyer steam train operations are suspended and all staff laid off.
The vintage tourist train which runs at the southern end of Lake Wakatipu near Queenstown was revived last year by former winegrower David Bryce after the previous owner went into liquidation.
Operations manager Russell Glendinning, said Mr Bryce told him and 10 other employees on Saturday they had no work from Monday because the locomotive Ab 778 is being taken off the rails.
He said the locomotive had been leaking but it is repairable.
Mr Glendinning said the staff are devastated because some had come from other places to work the train and had worked very hard to keep it going.
In a statement Mr Bryce said serious issues with the engine have forced the suspension, because the safety of staff, passengers and the public is of paramount importance.
He said he will concentrate on getting the train's second locomotive (Ab 795) back from repairs and ready to operate by mid-January.
In the meantime, Mr Bryce said the train will be for sale again, because of his poor health.
