The bad will generated by all this is so sad, so unnecessary, and so avoidable.
Any sponsorship deals have to be confirmed and committed to, a long way in advance. Otherwise your event becomes a nonevent.
And yes, as noted by one poster, it even filters right down to the food vans who often have exclusivity clauses in their contracts to ensure the financial viability of their presence. For instance, at one of the Caboolture Air spectacular events (some years ago), the warplane museum was quite forcefully prevented from running their monthly sausage sizzle on the day, as it went against the food purveyer contract signed by the organisers.
In this case we are losing an event because of a failure (probably at many levels) of communication, negotiation, and mediation.