Australia’s largest international gateway is planning a major overhaul that has been welcomed as a potential boost for the tourism industry.

Sydney Airport has proposed dividing its terminals by the country’s major airlines rather than by international and domestic traffic, in a move that aims to increase capacity and improve connection times.

Under the plan, the airport’s domestic terminals would accommodate Qantas, its international partners and Jetstar. The international terminal would house Virgin Australia and other international airlines.

Access for regional airlines would be guaranteed but their operating location would be open to consultation.

The plan was aimed at improving service for customers and improving efficiency for the airlines, Sydney Airport chief executive Kerrie Mather said on Monday.

“The passenger experience is improved through faster connect times and more efficient airline and airport operations,” Ms Mather said in a statement. “The new airport configuration would minimise operating disruptions, which – given the significance of Sydney Airport – would have positive flow-on benefits to the rest of Australia’s aviation network.”

Qantas and Virgin have entered into initial agreements of understanding with Sydney Airport on the plan, which includes a commitment to examine its financial effects on several long-term leases.

Both airlines welcomed the proposal.

Australian Tourism Export Council managing director Felicia Mariani said the proposed new configuration would be positive for the tourism industry.

“This proposal will greatly increase Sydney Airport’s capacity and visitor experience which, as Australia’s major aviation gateway, is crucial to our ability to take full advantage of future tourism growth,” Ms Mariani said.

Tourism Australia and the Sydney Business Chamber have also supported the proposal.

It has been put forward ahead of the airport’s 2014 master plan process, which is due to start in 2013.