About 80 jobs at Safe Air in Blenheim will be cut in a proposed restructuring of the business.
The Marlborough aviation company is an Air New Zealand subsidiary based at Woodbourne airfield near Blenheim and employs about 260 staff, its website says.
Marlborough Mayor Alistair Sowman said the cuts were a "tough blow" for the region.
He called on the Government to work with the company to secure its long-term future.
"Safe Air is a critical part of our aviation sector and we desperately want to retain its operations here, but it is reliant now on defence contracts, and we understand that means the company's future is really in the hands of the Government," he said.
"Losing the company altogether would rip the heart out of Marlborough's aviation sector."
An Air New Zealand spokeswoman said Safe Air was consulting on a process that could see about 80 jobs at the aviation maintenance, repair and overhaul business cut.
She would not comment on the exact number of positions to go or when redundant staff would leave the company.
"We are in a consultation process; nothing is confirmed."
The consultation process was expected to take "a couple of months", the spokeswoman said.
The redundancies would affect management, support staff and production staff.
Safe Air had been supporting the upgrades of the Royal New Zealand Air Force's C-130 Hercules and P3 Orion aircraft fleets since 2005, she said.
The upgrade programme was expected to be completed in the next 12 months, and fewer staff would be needed.
Air New Zealand's prime focus was to work through the consultation with staff to finalise the company's future structure and to support staff through the change, the spokeswoman said.
The Engineering, Printing and Manufacturing Union said Safe Air planned to make 84 of its staff redundant.
It said the company had told staff the redundancies were a result of existing contracts coming to an end and the high New Zealand dollar making the business uncompetitive in attracting international work.
Union assistant director Strachan Crang said the job losses were a blow to Marlborough.
"This is a kick in the guts for Blenheim. Safe Air is the largest employer in town and the loss of so many highly skilled, well-paid jobs will have a flow-on effect across the region," he said.
"There are now going to be 84 more houses for sale in Blenheim and 84 fewer families spending in the local shops.
"Safe Air is a world-class facility that only a few years ago was doing work for international clients like Boeing and the Chilean Air Force, but it's been laid low by the Government's refusal to support Kiwi jobs.
"You can't build an economy on lattes and convention centres. It's time the Government woke up and supported good, well-paid manufacturing jobs, and it can start by bringing down the exchange rate and buying Kiwi-made."
Crang said the union would enter consultation with the company.
Safe Air workers are entitled to redundancy pay as part of their union-negotiated collective agreement.
An Air New Zealand representative visited Sowman this afternoon and explained Safe Air had come to the end of a servicing contract and had not been able to secure a new one.
Safe Air had maintenance work with the New Zealand Defence Force, and Sowman planned to talk to the Ministry of Defence to secure more work for the company.
"We are reliant on Air New Zealand and the Government to secure jobs for Safe Air," he said.
Staff made redundant were highly skilled and would hopefully find other jobs in Marlborough, he said.
- The Marlborough Express