The Civil Aviation Safety Authority (CASA) has grounded Queensland airline Barrier Aviation for five working days, saying it poses a serious and imminent risk to air safety.
The Cairns-based airline flies to Horn Island, Darwin, Gove Peninsula, Papua New Guinea and the Pacific Islands.
CASA spokesman Peter Gibson says a safety audit identified serious maintenance issues.
"The problems centre on maintenance of aircraft, maintenance that's not being done, maintenance that's not being done property, and maintenance that's not being tracked and recorded," he said.
"We're got no faith in the fact that the aircraft are being looked after in the way that they should be." Mr Gibson says action could be taken in the Federal Court to extend the grounding.
"We need to determine whether there are further issues that we need to investigate and if we need the extra time, then we will go to the court and seek that," he said.
"This grounding was not in any way driven by the fact we're at the holiday season: it's business as usual; if we find serious safety matters we must act." CASA says it expects the grounding of the airline will have a minimal impact on Northern Territory travellers this Christmas.
Mr Gibson says while the airline doesn't run regular services, it does provide charter flights.
"This will have some impact on those chartered services," he said.
"Luckily, this is a relatively quiet time of year for charters, so the impact shouldn't be too great.
"Other operators should be able to pick up the passengers that Barrier can't move." The ABC has contacted Barrier Aviation for comment.