The Warrnambool City and Glenelg Shire councils and the state government contributed matched funding, which guaranteed the twice-daily-weekday and Sunday services to and from Melbourne would continue until July.

Sharp revealed on Monday the service would stop at that time due to low patronage.

A state government spokeswoman said: "We understand and share the Great South Coast community's disappointment that Sharp Airlines has made the commercial decision to cease its scheduled services".

"Through Regional Development Victoria, we will continue to work with local government and industry to help attract a new carrier to provide this connection for locals, regional businesses and the Great South Coast's growing tourism industry."

The spokeswoman advised funding was provided to Glenelg Shire in January 2019 to support the service's continued operation for a period of six months and help them to become sustainable while RDV worked with the airline, local government and industry to grow passengers.

The Glenelg Shire and Warrnambool council also contributed $75,000 each to support the service's operation and efforts to grow passengers.

The government said as the terms of this agreement had been met, there would be no return of funds.

Glenelg Shire mayor Anita Rank said an extensive marketing campaign was implemented to highlight the benefits of using the service.

"This included a TV campaign which was proposed to air later this month on two regional channels," she said.

"This was in addition to ongoing social media campaigning, developed with assistance from council and Great Ocean Road Regional Tourism, detailing tourism packages to entice new domestic travellers, in addition to deals for local passengers.

"Travel packages were developed with local tourism and business outlets and promoted in metropolitan markets, including golf packages to Warrnambool and Port Fairy."

Cr Rank said both council's worked extensively with local businesses and industry, creating a directory detailing a list of potential clients.

"Ultimately these campaigns were successful in boosting patronage and furthermore highlighting the tourism opportunities available in the region," she said.

Member for South West Coast Roma Britnell said it was disappointing when transport connections between regional and metropolitan areas were reduced.

"When we have major population pressures in the city, we need to be making regional centres like Warrnambool and Portland more attractive - one of the best ways to do that is with connectivity," she said.

"The state government needs to develop a comprehensive population policy. One that develops regional areas by investing in infrastructure to help existing businesses grow and encourages new businesses to establish.

"South West Coast has huge opportunities to help take the pressure off the city and to share in Victoria's growing population, but there needs to be policies in place and investments made to help capitalise on the opportunities."

Warrnambool Ratepayers Association president Brian Kelson, who was critical of the council giving the airline cash for its survival when it was announced, said bailing out a private company was not right when the council was seeking approval to raise its annual rates.

He said $75,00 with no consultation from ratepayers was unfair and questioned why a private company was able to receive a support package.

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