Airlines of Tasmania was established as a regular public transport operator (previously it had been an airwork operator) in 1978, along with Par-Avion, a different branding used for chartered and sightseeing flights. During its early years, the company had regular services to the West Coast from Queenstown and Strahan. In the 2004–2005 year there was a service between Hobart and Strahan, but this service was closed due to marginal traffic. Early in 2008, the airline moved its Melbourne operations from Moorabbin Airport to Essendon Airport, due to the airline upgrading its fleet by introducing the Dornier Do 228.
During July 2012, Sharp Airlines took over all scheduled operations to King Island.
In December 2013, the airline announced a partnership with the University of Tasmania, for flying training study as part of a Tertiary Qualification.
In February 2014, the airline announced it was intending to expand into the mainland and commence regular services from Essendon to Griffith. Following approval by the Civil Aviation Safety Authority, the airline announced the first services would begin on 17 March, under the Par Avion brand. It is expected the airline will use Cessna 404 Titan equipment on the new route.