A $12.7m expansion and upgrade has been announced for Tauranga Airport.

Over the next 15 months, the terminal passenger area will be expanded to cater for past, present and future increases in passenger volumes as there has been a significant increase in air travel regionally and worldwide.

This development was approved when Tauranga City Council reviewed the Airport Master Plan in late 2015. The review showed the terminal was operating at capacity and needed to expand to keep pace with the growth of Tauranga.

The total budget for the project is $12.7 million. The interest and debt servicing will come from the Airports current cash reserves and the Airports commercial revenues going forward. The project requires no rate funding.

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The expansion will accommodate the increase in Air New Zealand passenger volumes and provide for other regional network operators to fly in and out of Tauranga.

The floor area of the terminal will more than double from 1700m2 to 3800m2. This will include developing separate check in and arrival areas and increasing space for back of house operations, allow for future upgrades and a new, larger Air New Zealand Regional Lounge.

The new check-in area will have state of the art check in kiosks, a baggage drop belt and a new externally accessed courier and cargo office. The changes will also result in a shorter walk from the terminal for boarding and the Airport Café will be increased and improved.

Air New Zealand regional affairs manager Ian Collier said Tauranga was a key destination and the airline welcomed the changes.

Local iwi will be involved in developing better welcoming and farewell messaging along with creating artwork reflecting local history, including history Tauranga Airport dating back to its opening in January 1939.

The expansion will accommodate the increase in Air New Zealand passenger volumes and provide for other regional network operators to fly in and out of Tauranga.

Tauranga Airport manager Ray Dumble said in a written statement Naylor Love Construction was the successful tenderer and works is expected to begin in late October, with completion due in December 2018.

"The project has a number of challenges not least driving piles in the existing Terminal building down to a depth of 27m due to ground conditions. Another challenge will be to keep the Terminal operating as normal as possible during construction, with the least amount of inconvenience to the public, tenants and operators. Significant planning has gone into this aspect of the project to date."

The expansion is intended to meet capacity demands up to and beyond 2027.