Budget airline Scoot, a subsidiary of Singapore Airlines, has begun a daily service between Sydney and Singapore.
Scoot's first Boeing 777 arrived at Sydney Airport last week.
The airport's chief executive officer, Kerrie Mather, said the new carrier would generate A$146 million a year for the New South Wales economy and bring close to 400 passengers to Sydney every day.
"We've already seen low-cost carriers stimulating markets here and internationally," Mather said in a statement.
"Low-cost carriers on long-haul routes are making it more affordable than ever for Australians to see the world."
NSW Tourism Minister George Souris said Scoot chose Sydney over strong competition from Victoria and Queensland.
"Sydney welcomes Scoot and the first group of passengers to travel on this new service," he said in a statement.