The extension, which would open up the airport to wide-body long-haul international aircraft, has been among the region's top infrastructure priorities for the past decade.

An independent economic impact assessment for the project found spending $150million on the runway and terminal upgrades would boost regional economic income by $12.7billion over the next 20 years and create 4,410 new full-time jobs in the region that otherwise wouldn't have been achieved through natural airport growth.

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A delegation from the airport met with NSW Department of Premier and Cabinet representatives in Sydney last Friday to progress the ambitious project.

But, in a dramatic turn of events following the meeting, the Department of Premier and Cabinet told the Newcastle Herald it did not consider the project to be economically viable.

It cited a government-commissioned pre-feasibility study that poured cold water on the project's forecast economic benefits when compared to the significant outlay.

"The study determined that, while upgrading facilities to accommodate wide body, long-haul international aircraft has some merit, the significant project costs are unlikely to be justified by the forecast economic benefits," the statement said.

But following a series of intense backroom talks, the government had changed its attitude towards the project by Tuesday afternoon.

A second statement described last Friday's meeting as "productive".

"It was agreed that further information and data would be submitted to further Newcastle Airport's proposal," a statement said.

"Technical consultants and departmental officials will continue to work together on the additional information required for the government to be able to properly assess the project."

READ THE TWO STATEMENTS HERE:

The same statement was issued by the office of Parliamentary Secretary for the Hunter Catherine Cusack, who has expressed support for the project.

A Newcastle Airport spokesman said on Tuesday that the airport was confident the government understood the value of the runway project to region.

"Since opening up a seasonal service to New Zealand, Newcastle Airport is being approached by international airlines on a regular basis with a view to flying to new international destinations," a spokesman said.

"An upgraded airport will ensure these opportunities are not squandered."

He said the airport was willing to invest heavily in the project to reduce the amount of public funding required.

"Currently we are in a situation where technocrats are arguing over esoteric points, whilst this fundamentally positive project is running out of time to implement," the spokesman said.

"We also feel strongly that regional NSW residents deserve direct access to inexpensive international travel, which is something people in capital cities take for granted."

"This has been confirmed by our catchment, for example 94 per cent of Hunter residents want increased international flights from Newcastle Airport."

The runway extension is also regarded as critical for the proposed Williamtown special activation precinct.

The Williamtown proposal is presently competing with several other locations in regional NSW to become the location for the next special activation precinct.

If Williamtown gets the nod it is estimated the precinct would generate about 10,000 jobs based around the aerospace and defence industries.

The state government would streamline planning approvals and tailor infrastructure investment in areas such rail, roads and drainage to support the precinct's establishment.

This could include a billion dollar rail corridor linking Hexham to Williamtown and the airport.

"At this stage, the NSW Government has committed to undertake a scoping study to investigate the potential for a Williamtown special activation precinct. The study will be finalised and considered by government over the coming months," a Department of Premier and Cabinet spokesman said.

"This investigation involves extensive research, analysis and forecasting to assess whether an investment in creating a special activation precinct makes sense."

Newcastle Business Chamber chief executive Bob Hawes said Hunter stakeholders were completely committed to keeping the runway extension, a "regional game changer" alive.

"We recognise the state is constantly assessing and arranging infrastructure project priorities and we continue to support the ambitions of the Newcastle Airport to provide information to government to demonstrate how this project will meet investment criteria thresholds" he said.

"The opportunity for the runway works to be done now whilst other defence related improvements are underway makes enormous practical sense and no doubt brings efficiencies to the project and the investment returns."

Likewise Port Stephens Mayor Ryan Palmer said, in addition to being his council's top priority, Hunter councils were completely united in their support for the runway extension.

"There is no other infrastructure project in the Hunter that has that level of support, he said.

"We have a once in a lifetime opportunity to make this project a reality for the benefit of future generations."

Port Stephens MP Kate Washington said the government's handling of recent runway extension talks had the makings of a "another Fingal Bay Road backflip."

"Rejecting the runway upgrade would be a handbrake on our region's economy. The upgrade would open up our tourist economy and extend our freight connections for local businesses, creating jobs at every step of the way," she said.

"I would be baffled if the government decides to shut the door on this project. There is only a small window of opportunity here, but after last year's election, the Liberals are obviously looking to turn off the tap."

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