Geelong's troubled Avalon Airport has been thrown a $12 million taxpayer-funded lifeline under a deal struck by the Andrews government to keep budget operator Jetstar at the airport until 2025.
In exchange for the money, Jetstar has promised to increase the number of flights to Avalon from five to seven, with two new yet-to-be disclosed domestic destinations to be added as part of a push to boost passenger numbers by 40 per cent.
Airport operator Linfox has also agreed to chip in an extra $14 million over 10 years, with Jetstar also making a modest contribution to the bailout fund.
Victorian Premier Daniel Andrews said the money would lay the ground work for a future expansion that could include an international carrier, saying he believed the airport had a strong future as a second airport for Melbourne and would be vital to the Geelong region.
The deal announced on Monday afternoon by Mr Andrews comes just three days before a funding package from the previous government was set to expire.
About 500,000 passengers a year currently use Avalon, with the plan expected to increase numbers to about 700,000 passengers.
"This is the security, the certainty, and ... the fundamental stability that more than 200 workers and many more beyond just those who directly work here have been calling for for many months, indeed many years," Mr Andrews said. "This is a strongest agreement that has ever been reached for a passenger service provider out of this airport."
The airline warned last month that it was weighing up its services at the airport due to mounting losses on the Sydney-Avalon route.
Jetstar's Australia and New Zealand chief executive, David Hall, said the funding deal helped to "bridge the gap" until its flights became profitable.
"Although our Avalon services have been unprofitable, we know there is strong commercial potential in the medium to long term as population growth gathers pace," he said.
Jetstar was left as the only airline to fly to Avalon in late 2011 after what was then branded Tiger Airways ditched services when air-safety investigators grounded its fleet because of safety concerns.
Tigerair Australia has also been in negotiations with the airport and government about resuming services there after a four-year absence. However, the possibility of the Virgin Australia-owned budget airline returning to Avalon was contingent on Jetstar pulling out after 11 years of flying to the airport.
Avalon Airport has struggled to compete against the might of Melbourne's Tullamarine Airport.
While Tigerair pulled out in 2011, Jetstar has also reduced its services there in recent years in favour of Tullamarine.
The airport suffered a further blow early last year when Qantas closed its heavy aircraft maintenance base there, and centralised its engineering operations in Brisbane.
Avalon has found it difficult to fill the hole left by Qantas because its three largest hangars – each 10,000 square metres – had been used for maintenance work on 747 jumbos.
