It is likely that councillors will also consider an option to extend the runway north by 200m in conjunction with that tender, subject to an associated funding proposal.

General manager, Peter Tegart, told the July 24 council meeting that the renewal works would take three months to complete and would be carried out in sections of 400m at the northern and southern ends of the runways and then a final 800m section in the middle.

Invitations to tender for the work appeared in national newspapers on July 13 and closed on August 3.

But there still remain a number of issues associated with the work, not least of which is council’s relationship with Rex Airlines, the regional carrier that operates the services from Merimbula and in the case of the Merimbula to Sydney route, under an exclusive licence granted by the NSW government for regional airlines. A review of the currently regulated Sydney/Merimbula route falls due in March 2013.

There are also some financial issues to be resolved according to the report presented to council on July 24 and a business plan still to be given to councillors.

Council’s relationship with Rex has not been smooth. While council believes there are opportunities to expand the airport, lengthen the runway and open up the routes to competition, Rex maintains that at 34,000 passengers a year to Sydney and 16,000 a year to Melbourne, the Merimbula routes are marginal at best.

In a letter to Mr Tegart, in January, Warrick Lodge, Rex’s general manager, network strategy and sales, said: “We strongly urge council to abandon its misguided ambitions and limit the airport works to the basic rehabilitation of the existing runway, with no unnecessary runway extension, which will not impose a needless and considerable strain to the airport budget.”

The runway has been subject to regular remedial work and in March CASA (Civil Aviation Safety Authority) temporarily closed the runway due to “surface failures” after heavy rain. There is no doubt that the runway is in need of substantial repair.

While that work takes place council sees an opportunity to extend the runway by 200m to the north which would allow 70 to 80 seater Q400 or equivalent turbo prop aircraft to land.

However when council was granted the special rate variation from financial year 2011/2012 to raise $333,000 a year to pay for a 20-year loan for airport infrastructure, IPART (Independent Pricing and Regulatory Tribunal) laid down strict guidelines that the money was not to be used for extending the runway but solely for repair and renovation.

That loan will now be benefitting from a four per cent subsidy in interest rates for 10 years after council was successful in applying to the state government for the loan assistance.

This has opened up the possibility of some financial fancy footwork that will free up funds for the extension.

In his report to council, Mr Tegart said: “Council has considered a separate report on the outcome of the successful LIRS (Local Infrastructure Renewal Scheme) loan interest subsidy, which may open an opportunity to borrow funds for the extension pending the outcome of the tenders.

The four per cent subsidy may enable council to borrow $5.5m to be serviced by the $333,000 rates special variation each year, and utilise reserves to fund the extension.”

However in another report to council on the LIRS loan subsidy, Mr Tegart appeared to be warning of possible cost increases for the airport works when he said: “Pending tender prices expected to be considered at the August council meeting, additional borrowings may be required for the airport renewal, capable of being serviced by the $333,000 special variation in accord with the instrument from IPART.”

In the meantime the passenger head tax, currently $11 a person, has yet to be resolved. Council is looking to get more but Rex is resisting citing examples of regional airports where a small increase in head tax caused a substantial drop in passenger numbers.

Mr Tegart’s report pointed to the possibility of an incentive scheme where charges remain at $11 a head for the current number of passengers and zero for any above that number.

There is also the matter of the runway works and how they may affect Rex’s operations.

In his report Mr Tegart said: “Subject to response from Rex, it is proposed to complete the northern and southern 400m sections to enable a 1200m runway to remain in service, and construct the 800m centre section last with gravel runoff. The latter may require closure to the runway and some restriction of services, or alternately, bus transport of passengers to the Moruya airport.”