Certainly isn't the first domestic airline in NZ to fail and won't be the last. I never flew with them on the domestic run because they didn't fly where I wanted to go (into the regions), and if I did ever fly to Auckland it was always to connect with an international flight - so was booked either with Air NZ or Qantas (back when the red rat actually flew domestic).
But they served their purpose, they made domestic flying in New Zealand a lot more affordable to those in the major centres. But if they wanted to have a real go, maybe a bit of competition into the larger regional routes might have helped. As Invercargill, Tauranga, Nelson, Palmerston North, Hamilton and Rotorua are still gold mines for Air New Zealand..