Qantas faces more competition on its flagship kangaroo route between Australia and Europe after China Southern, the sixth-biggest airline in the world, this week announced plans to fly between its Guangzhou hub and London's Heathrow Airport.

Labelling the new sector "the Canton route", China Southern executive vice-president He Zongkai said he hoped the new London service and additional frequent capacity to Amsterdam and Paris from Guangzhou would provide a compelling alternative for Australian travellers to Europe.

"This June we will launch a new Guangzhou-London air service and increase flight frequencies on our Guangzhou-Paris and Guangzhou-Amsterdam services to make Guangzhou an ideal transfer hub between Australia and Europe," Mr He said.

The move comes only two months after China Southern revealed plans to increase weekly flights to Australia from 35 to more than 110 during the next four years.

"Since last year, China Southern Airlines has operated double-daily flights between Sydney and Guangzhou," Mr He said.

"We have increased the frequency of our Melbourne-Guangzhou service to double-daily, extended our Brisbane-Guangzhou route to Beijing, and launched a new Perth-Guangzhou-Beijing service with three-weekly flights."

The planned increase in capacity would make China Southern a greater threat to Qantas than Middle-Eastern carrier Emirates, which currently has 70 flights a week to Australia.

Qantas is currently reviewing its troubled international operations and is planning to set up a hub for a new premium carrier in Southeast Asia to help reinvigorate the business.

It has chosen Malaysia over Singapore as a base for a new premium airline as part of a joint venture with Malaysia Airlines, but the details of the deal are still being agreed.

Singapore Airlines and Cathay Pacific are also expected to respond to China Southern's announcement as they move to protect the position of their Singapore and Hong Kong hubs as key destinations for flights to Europe and North America.

Fresh statistics yesterday showed international passengers from Asian markets such as China and Indonesia underpinned increased traffic flows in and out of Sydney and Melbourne last year, despite a drop in travel to and from Europe and the U.S.

Airport traffic at Melbourne airport increased by 1 percent in 2011, while traffic at Sydney airport rose 0.2 per cent. Domestic travel dipped slightly at both airports, down 2 percent at Melbourne and 1 per cent at Sydney.

The start of summer showed strong growth in the China market (up 11 percent) as well as Indonesia (7 percent ), India (5 percent), Singapore (5 percent), Hong Kong (5 percent), Malaysia (4 percent), New Zealand (3 percent) and Japan (3 percent).

European and U.S. markets dropped off, with fewer people flying to and from Britain (down 5 percent), and the U.S. (down 4 percent).