Virgin Atlantic could be starting its first London to Australia service by next summer.
A change to UK-Hong Kong air service agreements has freed Virgin to start a Heathrow-Sydney service, subject to European Commission approval.
"Everyone at Virgin has long wished to start an Australia service and this is a dream come true for the travelling public and Virgin," said the airline's chairman Sir Richard Branson.
Virgin already flies between London and Hong Kong and operates within Australia through its Virgin Blue company. However, until the change in service patterns agreed by Hong Kong today, it has not been able to fly to Australia from London via Hong Kong.
The airline will now be able to take on the likes of British Airways and Qantas on the London-to-Australia route, which has been growing in popularity following the enormous world exposure Australia has received from the 2000 Olympic Games and Rugby World Cup.
The new service arrangement will also allow Hong Kong carrier Cathay Pacific to compete with BA, Virgin and US carriers American Airlines and United on the Heathrow-New York route.