The Victorian state government will pay several million dollars to keep Jetstar at Avalon Airport for another 18 months.

Under the multimillion dollar agreement reached with Jetstar and airport owner Linfox, the airline will remain at Melbourne’s second major airport until at least April 2015.

It’s believed Victoria’s government will put in most of the $5.5 million, with Jetstar and Linfox each contributing $2.75 million, Fairfax Media reports.

Aviation Industry Minister Gordon Rich-Phillips says the deal secures Jetstar’s five flights a day.

“It locks it in for the 18-month window so that we can actually continue to work with Avalon Airport to secure international services, because obviously that’s the long term plan for Avalon,” he told ABC radio.

The deal comes after concerns were raised last week that Jetstar was considering pulling the pin on Avalon.

At the time an airline spokesman said services to and from the airport had been underperforming and it had been heavily discounting fares to fill seats.

This position was unsustainable, he said.

The Avaloan decision comes two days after Jetstar confirmed it will establish a new cabin crew and pilot base in Adelaide after cutting back on services from Darwin.

The move reverses Jetstar’s decision in August 2008 to shut its Adelaide base.

The move will boost the company’s workforce in Adelaide from 40 to about 160 as they service four A320 aircraft to be based locally from March next year.

Three of those aircraft are being relocated from Darwin, in response to increased competition on international routes from overseas airlines.

Jetstar is suspending its services from Darwin to Manila and Tokyo, and decreasing flights from Darwin to Denpasar and Singapore.

The airline said it made sense to base aircraft where its network was growing, to keep fares low and ensure flexibility to adapt to changing market conditions.

Chief executive David Hall says the airline will begin direct services from Adelaide to Auckland and non-stop flights from Adelaide to Bali.

“Our presence in Adelaide has more than doubled in the past four years and we believe the establishment of a dedicated crew base will provide a solid foundation to continue to grow low fares from the capital of South Australia,” Hall said in a statement on Monday.

He said some of the 40 pilot, 70 cabin crew and about a dozen ground staff positions will be relocated from other states.

The decision brings the airline back to Adelaide after its 2008 decision to close its Adelaide base.