The Air Race World Championship has cancelled its Lake Macquarie event and the two other rounds in this year's series.
Lake Macquarie MP Greg Piper said he was "disappointed" that the Hunter event in November had been cancelled.
The NSW government announced in April that it would spend $2.5 million on bringing the event to the Hunter.
Championship organisers said at the time that they had signed an agreement to race over Lake Macquarie in 2022 with an option for 2023 and 2024.
The racing was expected to bring in $8 million in economic benefits and give the Hunter's reigning world champion pilot, Matt Hall, a chance to compete in front of his home crowd.
Mr Hall said on social media on Sunday that he was "very sorry to pass on this news from the organisers who have worked day and night to see the return of racing but it looks like it won't happen this year".
The organisers blamed the COVID-19 pandemic and global economic conditions for cancelling races in Lake Macquarie, Malaysia and Jakarta.
They were the only events planned for 2022 after new promoters revived the series following major sponsor Red Bull's exit from the sport in 2019.
"Despite the tireless efforts and support of all of our race teams, specialist suppliers and partners, some of the challenges presented by COVID and further implications posed by the current global economic situation have simply been too great to overcome," the organisers said on their Twitter account.
"The safety of our pilots and fans is paramount and without all of the intricate parts required for safe racing firmly in place we have been forced to make this very difficult decision to cancel the 2022 World Championship Series."
The Air Race World Championship organisation said it would focus its efforts on reviving the series next year.
"We remain totally committed as event organisers, competitors and fans of this incredible sport as we now focus on 2023. We'll be updating on plans and news as it happens. Stay tuned."
