A Qantas flight bound for Brisbane was forced to turn back to Sydney after suffering an engine failure, which in turn caused a grass fire that shuttered one of the airport’s runways.

QF520 left Sydney airport about 12.35pm, but four minutes later the Boeing 737 carrying about 170 passengers suddenly changed direction and stopped climbing, before circling and returning to the airport, where it made an emergency landing shortly after 1pm.

ABC reporter Mark Willacy was onboard the flight. He told ABC TV that just as the plane was taking off, “there was a large bang and a really jolting shudder went through the plane”.

“We knew immediately something was wrong, but what was more disturbing, I think, was the plane really laboured after that,” he said.

“It was a real struggle to get airborne and it was clear to everyone – the crew and the passengers – that something was badly wrong at that point.”

Willacy said the plane slowly got more altitude and banked to the west, did a loop and came back over Sydney and the ocean. The pilots spoke to passengers after 10 or 15 minutes to explain something happened with the engine on the right wing, but “it was shut down [and] things were under control”.

The plane then landed and firetrucks came to inspect the engine.

• Sign up for Guardian Australia’s breaking news email

Willacy said there was a lot of smoke and passengers witnessed the grass fire.

Qantas’s chief pilot, captain Richard Tobiano, said the flight “experienced a suspected engine failure” after take-off.

“After circling for a short period of time, the aircraft landed safely at Sydney airport. Our pilots are highly trained to handle situations like this and the aircraft landed safely after the appropriate procedures were conducted.”

Tobiano said the incident “would have been a distressing experience” for passengers and the airline would provide support to those onboard.

“We will also be conducting an investigation into what caused the engine issue.”

No injuries were reported, and passengers were rebooked on alternative services.

Qantas engineers conducted a preliminary inspection, which confirmed the plane suffered a contained engine failure. Jets can safely fly on just one engine.

“While customers would have heard a loud bang, there was not an explosion,” Tobiano said.

Georgina Lewis, an employee of the Nine network, was also onboard the Boeing 737.

“We were taking off and we heard a bang,” she told Nine. “One of the engines appeared to have gone.”

The Australian and International Pilots Association (AIPA), a union that represents some Qantas pilots, commended the crew onboard QF520.

In a statement, the AIPA’s safety and technical director, captain Steve Cornell, said “engine failures are extremely rare but Qantas pilots are exceptionally well trained to handle them with the utmost professionalism”.

“In this instance the crew displayed remarkable skill, expertise and composure in returning safely to Sydney and protecting everyone onboard.

“This incident demonstrates the value of having two well-trained and well-rested pilots on the flight deck as the most essential safety feature in aviation.”

The grass fire led to some flights being diverted to land at Newcastle airport.

An Airservices spokesperson said: “An engine failure on departure from Runway 34R caused a grass area adjacent to the runway to catch fire. Airservices’ ARFF crews quickly attended the grass fire and extinguished it.

“Airservices’ National Operations Management Centre enacted a 47-minute ground stop at Sydney Airport to ensure the plane could land as quickly as possible. ARFF crews met QFA520 when it landed safely on Runway 34L, with nil passenger injuries,” the Airservices spokesperson said.

The dual incidents occurred just after an Australia-wide outage at international airport immigration gates was resolved.

The Australian Border Force was still investigating the source of Friday’s technical outage, which heavily affected Melbourne and Sydney airports.

SmartGate kiosks for inbound and outbound passengers on Friday morning were not functioning, with three departures out of Melbourne delayed.

Border force said systems were back online at all airports by midday AEDT, but they were yet to find the source.

“The cause of the technical issue remains under investigation,” the spokesperson said.

With Australian Associated Press