The report, by consultants The Ambidji Group, examined whether the airport could be upgraded to take larger aircraft like those used by low-cost airlines.

It was prepared as part of the development application for Delmo, the firm behind proposals for the adjoining Illawarra Regional Business Park.

It is feared that the airport's expansion could be limited if the business park is located too close to its boundaries.

The report said the airport's short runway could not cope with modern passenger planes.

"Based on this very cursory analysis ... it would be most unlikely that Illawarra Regional Airport could be upgraded satisfactorily to Code 3C status as the existing topographical, community and infrastructure constraints would require significant capital investment to overcome," the report states.

It also notes that a pilot shortage has led to the cancellation of services to other regional areas and said it was unlikely carriers would commit to the Illawarra.

Last month, Qantas cancelled its Wollongong-Melbourne service, though at the time it cited rising fuel costs as the reason.

Shellharbour City Council, which has long supported the expansion of the airport, disagreed with the findings.

Director of Operations and Services Arthur Webster said it was important to remember that the Ambidji report was completed "without the benefit of an on-site inspection or access to detailed planning data".

"This is evident in the report, which appears to have been prepared in haste to weaken council's position of requiring building setbacks on the proposed Delmo development," he said.

"The attraction of low-cost carriers to Illawarra Regional Airport is an objective of council and the capacity of the airport infrastructure to accept larger aircraft of the type that are being introduced into some regional airports is currently being investigated."

Tourist groups have long argued that an upgrade to the airport is the only way Wollongong will compete with other regional tourist destinations like Newcastle.

Yesterday, Tourism Wollongong chairman Jim Eddy conceded the airport had problems, but argued they weren't insurmountable.

"Yes, I understand the airport is underdeveloped ... but those issues can be overcome," he said.

"A proper business case should be put together, including a master plan with an accompanying feasibility study demonstrating the viability of the airport."