Under the bilateral deal, Qatar Airways will now be able to operate flights to and from the southern city of Melbourne while Australian airlines will gain access to Europe through the Qatari capital Doha, he said.

"Australia is an attractive and competitive tourist destination and it will now be up to airports and tourism operators to make the most of the opportunities created," Vaile said.

Vaile said the Qatar government had recognised Australia's need for fair access to developing aviation hubs.

"Without the ability to operate services through intermediate hubs such as Doha to long-haul destinations in Europe, Australian carriers cannot compete effectively on the world stage," he said.

Under the agreement, Qatar Airways can begin a second daily service to another Australian city from 2008.

Australia's national carrier Qantas said the move reinforced the need to restructure and cut costs to compete with government-owned Mideast carriers — Qatar, Emirates and Etihad — on routes between Australia and Europe.

"Around 20 airlines currently already fly these routes over a range of hubs, and with yet more capacity coming into the market, Qantas will have no option but to achieve further cost savings if it is to remain competitive," chief executive Geoff Dixon said.

Qantas Airways Ltd. is subject to an 11.1 billion Australian dollar ($8.7-billion) takeover bid from a private equity-backed consortium, prompting concerns that the change in ownership could lead to job losses.

"The reality is that whatever its ownership structure, Qantas must change, and will continue to change, to ensure it remains successful," Dixon said.