A Tongan pro-democracy MP, Fred Sevele, the closing of the airline Fly Niu will hurt investor confidence.
This week, Fly Niu, was this week ordered to stop operating in line with a new government policy of allowing only one domestic airline.
This clears the way for a rival airline backed by the crown prince to have a monopoly.
Mr Sevele says the sudden introduction of the policy will hurt the economy.
"An adverse side effect of this whole issue is that people are now saying, including some of the overseas investors no we don't want to come in because the rules may change half way, so we are not going to invest money. This is one of the possible adverse effects of this whole saga."
Tongan pro-democracy MP, Fred Sevele