But yesterday’s allocation comes with a catch — the state will only proceed with the project if the federal government also comes to the party.

The upgrade, estimated to cost $4.5 million, involves extending the main runway to cater for larger commercial and passenger planes and improving key infrastructure, leading to the construction of up to 20 new hangars.

It is expected to create up to 20 new jobs at the Mailors Flat airport precinct and trigger other investment opportunities.

State Aviation Minister Gordon Rich-Phillips, who flew into Warrnambool in his private plane yesterday morning, said he was disappointed to learn earlier this week that the Commonwealth had rejected the airport’s bid for funding. “The Coalition government recognises that Warrnambool’s aviation park precinct is important to the future of south-west Victoria,” Mr Rich-Phillips said.

“The expansion would create up to 20 jobs for the region’s growing energy industry and will help attract long-term investment.”

He said money for Warrnambool Regional Airport was one of the first projects earmarked from the Coalition government’s $20 million Regional Aviation Fund, but it required matching federal funding.

“There are a range of infrastructure upgrades ready to go ahead including new taxiways, access roads, drainage and essential services infrastructure.”

Mr Rich-Phillips said he spoke to a number of operators and businesses at the airport when he travelled to Warrnambool during a Community Cabinet visit last September.

Member for South West Coast Denis Napthine said the state government recognised the opportunities the Warrnambool airpark project would deliver for the region.

“This project presents the opportunity to further this growth by developing the region’s aviation industry and securing Origin Energy as a long-term tenant at the airpark,” Dr Napthine said.

Origin has indicated it is keen to use the site as a base for operating flights to its off-shore facility.

Warrnambool mayor Jacinta Ermacora described the airport as the “aerial gateway” to the Great South Coast region, saying it played a critical role in the economic and social value of the area. She said the master plan was drawn up to cater for future investment and job growth, with the existing facilities unable to cater for expansion and demand.

The existing 14 hangars, including the helicopter ambulance base, are booked out and there is a long waiting list of local business operators and larger corporations keen to establish a base.

The city council also hopes the project may trigger the return to regular passenger air services. Under the upgrade plans, the main runway length of 1372 metres would be extended to 1600 metres which would allow larger planes to land and take off.