During circuit training at Wanaka Airport, Molloy alleges the instructor, who was more than 20 years her senior, made multiple sexual advances towards her.
He asked her if she wanted to join the mile high club and even stroked her thigh while they were airborne and other aircraft flew past them.
At the time, Molloy thought it was a relationship but looking back she now knows it wasn't, claiming the man created a power imbalance and she became worn down by his advances.
Newshub reports her parents complained to the CAA about the instructor who started an investigation into the man.
An investigator told Molloy "As an instructor, he has certain responsibilities, and I believe he has crossed over those boundaries."
They deemed a relationship was fine as long as it stayed on the ground but when the plane is airborne, then it becomes a safety issue.
Following the investigation, it was thought an offence had likely been committed but the director at the time decided not to prosecute after considering "the public interest factors, including the potential impact on the victim".
The instructor told Newshub whatever happened between him and Molloy was completely by mutual consent.
"It was a dark period of my life and I sought professional help. For her to say I harassed her and groomed her is probably a little bit untrue."
Molloy said the investigation made things worse for her at the flight school, culminating in her getting thrown out by the instructor in question.
"The trauma I suffered because of the investigation was more trauma than I suffered at the flight school," she told Newshub.
"What has been the point of me traumatising myself to the extent that I've gone through to go through this investigation when that is the conclusion?"
Current CAA director Graeme Harris was not the director at the time of the investigation, and said he would have taken action.
