The carrier launched only in December with Muslim flight crew wearing the hijab while non-Muslim members were forbidden from wearing revealing clothing. In-flight meals were completely halal and alcohol consumption banned.
But after an “investigation into the administration and safety audit” of the airline, the Department of Aviation (DCA) said it has revoked Rayani’s Air Operator Certificate.
The DCA launched an inquiry into the airline in April following a string of criticisms from passengers and the government over delays and last-minute cancellations.
That month saw pilots of the carrier, which operates two Boeing 737-400s, also go on strike over unpaid wages, further damaging its image.
DCA director-general Azharuddin Abdul Rahman said the government took the step to cease Rayani’s operation because “safety and security of the aviation industry is of paramount importance”.
The decision comes two years after Malaysia faced twin aviation disasters.
Malaysia Airlines flight MH17 was shot down in July 2014 over rebel-held eastern Ukraine in a missile strike, killing all 298 people on board.
Australia is leading the search for Malaysia Airlines flight MH370 in the remote Indian Ocean, where the Beijing-bound plane is believed to have diverted when it disappeared on March 8, 2014 carrying 239 passengers and crew.