A record number of passengers passed through Hawke's Bay Airport over the past year, prompting plans to upgrade the terminal to cater for expected future growth.

The airport processed 456,672 passengers in the year to the end of June - 1.2 per cent more than the previous year - and expects to top 500,000 passenger a year by 2017.

"It's great news for Hawke's Bay and for us," was the message airport company director Sarah Park had for Hastings District councillors this week, during a presentation to the council on the airport's annual financial result.

The ever-expanding airport is jointly owned by Hastings District Council, Napier City Council and central government.

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Ms Park said growth in passenger numbers through the airport was being boosted by Air New Zealand's decision to fly larger planes in and out of the region.

The airline is in the process of replacing 50-seat Q300 aircraft with 68-seat ATRs on services between Napier and Auckland, Wellington and Christchurch.

Ms Park said the change to the larger planes meant the airport was "getting quite congested" at peak times, when there were three of the larger aircraft on the tarmac.

"It makes a big difference to the volume of people in the airport and flow around the airport. So we are looking at what we can do to improve - not only extend the terminal but also improve the customer experience overall."

There was also a need to "future proof" the terminal to allow for the possibility of a second airline servicing the region at some time in the future, she said.

Details and costs of the terminal upgrade had not been finalised but last week the airport contracted Impact Group, a company involved in the redevelopment of Wellington Airport, to project manage the proposed Hawke's Bay terminal upgrade.

Ms Park, who joined the airport board in July, said before she took up the role she asked a number of people for their impression of the facility and two phrases that came up were "convenience" and "bad coffee".

She said a key part of the planned terminal redevelopment would be attempting to make time spent at the airport more enjoyable, so visitors felt comfortable staying longer.

"It's also making a place where people want to stay, they want to have a good cup of coffee, they want to have something to eat, they maybe want to buy some Hawke's Bay wine or produce."

The airport's income increased by 10.1 per cent in the past year to $4.01 million but its after-tax profit dropped from $1.1 million to $394,000.

The reduction in profit was due to a decision by the company to impair the value of its business park assets by $696,400.

"We've done this in light of the current weak environment for commercial property and land in Hawke's Bay," Ms Park said.

"To put it very succinctly, there is more supply than there is demand, and therefore as a supplier of opportunities we're having some challenges and we suspect that will continue in the short to medium term," she said.