Ottawa turned over control of the Gander airport to an independent authority in 2001.

The authority operating cash-starved Gander International Airport has warned the federal government it may have to terminate its lease —but Ottawa is standing firm.

In a letter obtained by CBC News, the airport authority says a federal offer of $5.9 million over two years would not solve entrenched problems at the airport.

The authority, which took over management of the airport from Transport Canada in 2001, told Ottawa it needs five years to achieve self-sufficiency.

The authority proposes two options: either a one-time payment of $10 million, or an annual payment of $2.5 million over five years to offset costs incurred by free military landings, a tradition that accounts for at least 40 per cent of traffic at the central Newfoundland airport.

The authority said the cost for Gander— a crossroads for international flights— has become untenable. Without a favourable response to its latest letter, the authority said, it will terminate its lease.

Federal Transport Minister Lawrence Cannon responded this week,telling the authority in a letter that Ottawa's offer was fair and not negotiable.

If the authority wants to terminate its lease, Cannon wrote, Transport Canada would work with the authority to ensure a "smooth transition of the airport back to the Crown."

Theauthority must now choose between fighting for additional money, or returning control of the airport to the federal government.