Japan Airlines is suspending its daily service from Osaka to Australia, despite pleas from Australia's federal Government for it to maintain flights between the two countries.

The airline will axe the Osaka-Brisbane-Sydney service from March 27 as it moves to return its passenger services to profitability, but will maintain its daily Tokyo-Brisbane and Tokyo-Sydney flights.

JAL also codeshares with Qantas on Tokyo-Cairns and Tokyo-Melbourne.

The move comes after Qantas's July announcement of a major rejig of its services, which increased flights from Sydney but reduced them from Melbourne to produce a net loss of 349 seats a week.

Both airlines have been facing falling passenger numbers as Australia has failed to capitalise on the economic turnaround in Japan.

Japanese visitor numbers to Australia have declined since 1997 and the recent "Where the bloody Hell are you?" tourism campaign resulted in a small 2.2 per cent increase in travel here.

Qantas hopes to lure more tourists with the launch of low-cost Jetstar services to Osaka in March, and earlier this year Tourism Minister Fran Bailey launched an action plan aimed at invigorating the market.

But experts warn that Japanese tourists are changing preferences, favouring nearer destinations with exotic cultures.

The JAL announcement will be another blow to Sydney Airport, which yesterday reported a 2.9 per cent drop in international traffic in August, compared to the previous year.

It was the second successive month that international airline traffic fell against the previous period.

Majority owner Macquarie Airports attributed the August fall to healthy figures in 2005, and a decrease in the domestic on-carriage of passengers as airlines instead flew them directly to other Australian destinations.

The growth in Japanese passenger numbers was flat at 0.1 per cent but markets such as China (up 19 per cent), Korea (up 12 per cent) and India (up 10 per cent) showed good increases.

Markets that declined included Britain (down 3 per cent), New Zealand (down 16 per cent), the US (down 6 per cent) and Germany (down 5 per cent).

The international fall was offset a 6 per cent increase in passenger numbers compared to last year which saw the airport's overall passenger traffic rise 3.1 per cent.

Other MAP airports to report good growth included Rome (up 8.2 per cent), Bristol (up 7.5 per cent) and Copenhagen (up 4.1 per cent). Birmingham fell 6.2 per cent and Brussels grew just 0.6 per cent.