Ardern has ordered the Ministry of Foreign Affairs and Trade (Mfat) officials to look into the issue.
"We do have obligations as a country to make sure that we are applying, for instance, UN sanctions," she told media this morning.
"Whilst it's not clear whether what happened here would have fallen within that, there are still reputation issues."
This morning, Air NZ boss Greg Foran said Air NZ's involvement was a case of "poor judgment".
Last night, 1News revealed that Gas Turbines – a subsidiary of Air NZ – has been servicing military marine engines and turbines for the Saudi military.
This is despite the Saudi military's role in the bloody war in Yemen – a war which has devastated the country and pushed it to the brink of famine.
Once the links between Gas Turbines and the Saudi military were brought to the attention of Air NZ, it apologised and called it an "oversight".
Its chief executive told Newstalk ZB this morning that Air NZ's top brass did not know about the deal.
"It is also being suggested it was some sort of conspiracy at the very top of Air NZ - that is not the case.
"This is something I found out 10 days ago, and I can assure you we took immediate action as soon as we found out."
This is something Ardern took issue with as well – "even more disappointing that the leadership of Air NZ were in the dark as well".
Foran's predecessor, National's now Botany MP Chris Luxon, this morning told media he had "no recollection" of any deal between the Air NZ subsidiary and the Saudi military.
"I was unaware of the issue," he said when pushed by reporters.
"It might have post-dated my time but the bottom line is that these are really questions for Air NZ, I haven't worked at Air NZ for some time."
Luxon resigned as the airline's chief executive in September 2019 – Foran this morning said the initial decision on the contract was made in 2019 before he took over the reins at the airline.
Luxon said he was surprised to hear that the company had been working with the Saudi military. "I think we have all been surprised by it".
But when pressed for further detail on the matter, he said a number of times that it was "a matter for Air NZ".