Up to 300 jobs at Avalon airport could go if Jetstar can't make its flight routes profitable.
Jetstar is the only passenger carrier at Victoria's second airport and its lease expires on April 30.
Avalon Airport chief executive Justin Giddings says the airport, near Geelong, has one month to persuade Jetstar to stay.
"It's hard to know, but I'd say 200-300 jobs could be affected," he told AAP.
"But, indirectly, it could be pretty damaging for Geelong."
The viability of the airport itself would be not be affected, even if Jetstar were to pull out, Mr Giddings said.
"We're right in the middle of Melbourne and Geelong, a growth corridor."
If Jetstar calls it quits, the airport will look at enticing another carrier to move in.
A Jetstar spokesman said they would look after the 60 people they employ at Avalon no matter what the final outcome.
"While no decision has been made, if our services were to cease at Avalon, employees would be offered a job at Tullamarine or other parts of our network," he told AAP.
"For those that would prefer not to transfer we would offer a redundancy package."
Victorian Premier Daniel Andrews says any potential bailout of Jetstar's Avalon operation would come with strings attached.
"There would be a whole range of conditions, we'd want to see services grow, we'd want to see more flights in and out of Avalon," he said on Wednesday.
Jetstar said a decision would be made before the current funding agreement between the Victorian government, Linfox and Jetstar expires.
Jetstar contributed $2.75 million to the 18-month, $11 million funding package.
But even with the assistance package, the route had been running at a loss for the past five years.
Opposition Leader Matthew Guy asked the government how serious it was about Avalon, given its recently-released aviation strategy made no mention of the airport.
Mr Andrews said the current situation had come about because the previous coalition government had used a short-term lease for the airport.
Jetstar has operated out of Avalon for 11 years but flights have been reduced to one Sydney route leaving five times a day.
It used to run 14 flights a day to various destinations six years ago, but had to stop because of low passenger numbers.
Geelong workers have had a tough few years, with job losses following factory closures at Ford, Qantas and Alcoa.
