The flight carrying 345 passengers and 14 crew was diverted to Brisbane airport just north of the eastern city and landed safely, the Malaysian carrier said.
An AirAsia flight to Malaysia returned to Brisbane on Monday night following a mid-air emergency shortly after takeoff.
AirAsia X said birds struck the plane's starboard engine shortly after take-off about 10.20pm on Monday, leading to the decision to ground the plane an hour later.
John Warren said there were loud bangs from the right wing of the A330 and "fairly big flames".
"I could see an orange light coming from the windows".
But newlyweds, Malissa Siaea and her husband said they noticed something odd before the plane had left.
"It started making amusing noises when we were getting ready for take-off", she told Fairfax Media.
"The flight took off and three minutes after the engine failed already, flames really went through it all".
'Then the plane swooped a little bit and started shaking badly, ' she told Fairfax.
She said not many passengers even realised there was a problem until a man yelled out "What the heck is happening?"
Two birds remains were found on the runway at the Gold Coast Airport.
Controversially, passengers on that flight recalled being told to "Say a prayer" as they attempted to return safely.
"Someone said the engine's on fire and we should pray but mostly everyone remained calm".
Mr Gibson praised the actions of the pilot and said CASA would review the incident but wasn't considering any other action.
"AirAsia X will arrange for a special flight to transport all guests on Flight D7 207 to Kuala Lumpur as soon as possible", he said in a statement.
In December 2014, an AirAsia plane crashed into the Java Sea, killing all 162 people on board after the aircraft's rudder control system malfunctioned during the flight.
The aircraft, registered 9M-XXT (MSN 1549), was operating flight D7207 from Gold Coast to Kuala Lumpur when the incident happened.