Originally called Karhumäki Airways, the company was founded in 1950 by Veljekset Karhumäki Oy, an aircraft manufacturer owned by Niilo and Valto Karhumäki.
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On 5 February 1973, a de Havilland Canada DHC-6 Twin Otter (registered OH-KOA) crashed near Pudasjärvi in heavy icing conditions during a scheduled domestic passenger flight from Oulu to Kuusamo because of an engine failure.
In 1963, Aero O/Y (today's Finnair) acquired the majority of its stake, and in 1996 Karair (as it was known by then) was fully absorbed into Finnair.