The following correction was printed in the Guardian's Corrections and clarifications column, Thursday February 7 2008

We mistakenly described nitrous oxide, one of the byproducts of an engine powered by liquid hydrogen, as being environmentally safe in the article below. It is a greenhouse gas nearly 300 times more powerful than carbon dioxide. However, the developer, Reaction Engines, has a research project under way to devise ways of eliminating or capturing all of the NOX elements produced by the fuel.

The artist's impression looks like something out of a science fiction film. But a hypersonic passenger plane that could fly to Australia from northern Europe in less than five hours has been designed in Britain. With funding from the European Space Agency, a team of engineers and scientists has come up with the A2, a plane they believe could carry 300 passengers at a top speed of more than 3,000mph.

The project is part of an EU drive to push forward the boundaries of air travel. Scientists were asked to find out if it was possible to build a commercial plane that used the sort of technology more closely associated with travel to the edge of space and beyond.

Oxfordshire-based Reaction Engines designs and develops space transport and hi-tech propulsion systems. Its directors are experts in fields ranging from space rockets and weapons systems to nuclear power. One of the firm's main projects is the development of Skylon, an unpiloted reusable spaceplane intended to provide inexpensive and reliable access to space, which is expected to take approximately 10 years to develop and be capable of transporting 12 tonnes of cargo into space.

Alan Bond, a senior engineer and managing director at the company, said the A2 could be operating within 25 years if there was demand for it.

Bond said: "The A2 is designed to leave Brussels international airport, fly quietly and subsonically out into the north Atlantic at mach 0.9 before reaching mach 5 across the North Pole and heading over the Pacific to Australia.

"The flight time from Brussels to Australia, allowing for air traffic control, would be four hours 40 minutes. It sounds incredible by today's standards but I don't see why future generations can't make day trips to Australasia."

Reaction Engines estimates that the cost of the flight would be similar to a current first class fare. Moreover, the company claims, the plane would not leave much of a carbon footprint.

The key to the design is the fuel it would use. Conventional fuels would not be able to get the A2 up to the

necessary speed, and so Reaction Engines has designed an engine that would run on liquid hydrogen. A spin-off is that liquid hydrogen is potentially much greener than conventional fuel - rather than producing vast amounts of carbon emissions it gives off water vapour and nitrous oxide.

Another advantage of the design is that while the 132 metre-long A2 is much bigger than conventional jets it would be lighter than a Boeing 747 and could land on current airport runways.

But there are a few hitches. For one thing, the A2 might not be great for anyone who suffers from claustrophobia, as it does not have portholes. The heat generated by travelling so quickly makes it difficult to install windows that are secure and not too heavy. One solution Reaction Engines has proposed is to install flat screen panels where the window would be, showing images of the scene outside.

In recent days the design has been discussed excitedly on science and environment talkboards. Some believe it would be too expensive to produce commercially. There is also concern that producing the liquid hydrogen could prove to be more environmentally damaging than Reaction Engines believes. And there are fears that because the plane would fly at around the height of the ozone layer it could cause damage to the atmosphere.

Still, Bond said that within 25 years 10% of air travel could be hypersonic. Some routes, such as Europe to India, would not work so well, because the plane would have to go a long way round to avoid having to travel at supersonic speeds over populated areas. But he thought the A2 could get to California by travelling hypersonically across the Atlantic, then conventionally across the US. Reaction Engines claims it would be quieter than Concorde ever was.

Bond accepted the project was still at the early exploratory stages. The next phase is more work on the A2's environmental impact. "Our work shows that it is possible technically; now it's up to the world to decide if it wants it."

Explainer: Concorde's legacy

The owner of the first hypersonic airline will have to overcome the failed legacy of Concorde, which made its last passenger flight nearly five years ago. British Airways and Air France grounded the supersonic service after a decline in bookings and a series of technical problems.

The root cause of its failure - low passenger demand - is a warning to all backers of futuristic aviation projects. Despite the benefits of a three-and-a-half hour flight time, its owners struggled to convince enough customers to pay £6,800 for a return ticket from London to New York.

The economic considerations were also underpinned by serious doubts over safety following a crash in Paris eight years ago in which 113 people died.

Chris Tarry, an aviation industry analyst, said a hypersonic jet service would be many times more expensive and would raise serious questions about passengers' ability to withstand sub-orbital travel. Similar concerns helped ground the Hotol hypersonic passenger jet project run by BAe, the defence company, more than a decade ago.

"Is this a commercial means of travel? No. You have to have something that is viable," said Tarry.

Doubts over the cost and safety of sub-orbital flights are not putting off entrepreneurs, however. Sir Richard Branson's Virgin Galactic venture intends to put passengers into space by the end of the decade and has already signed up 200 customers who have paid $30m (£15.2m) in deposits.

Dan Milmo