Flying taxis are one step closer to reality with ridesharing giant Uber announcing it will begin a pilot programme testing the vehicles in Melbourne.

Melbourne has been selected to be the San Francisco-based company's first international market for Uber Air, joining Dallas and Los Angeles as cities to trial and launch Uber Air flights within the next few years.

Test flights in all three cities will begin next year and plans to commercialise operations will commence from 2023, Uber made the announcement at its annual Elevate summit held in Washington DC on Tuesday.

Uber wants to open up urban air mobility and clear congestion on the roads. Long term, the transportation giant wants to transport tens of thousands of people across cities for the same price as an UberX trip over the same distance.

Australia has given Uber the green light for its flying taxi business Down Under.

The State Government of Victoria is supporting its plans and Susan Anderson, Uber regional general manager for Australia, New Zealand and North Asia, said the Victoria Government had recognised the role ridesharing played in the future of transport.

Melbourne was chosen as the third launch city for Uber Air given its demographic and geospatial factors, and culture of innovation, Anderson said.

Uber considered Auckland as the third city to trial Uber Air flights but ruled it out last year due to the much smaller population size.

Sydney is earmarked to be Uber's second international launch city for Uber Air.

During the event, Uber announced partnerships with Macquarie, Telstra and Westfield shopping center owner and operator Scentre Group, along with Melbourne Airport, to create the infrastructure and telecommunication services needed to create an urban aviation network for its flying taxis.

Congestion costs Australia about A$16.5 billion ($17.3b) in lost productivity annually and is forecast to increase to $30b by 2030.

Eric Allison, the global head of Uber Elevate, said Uber Air had the ability to alleviate congestion on roads, which was a growing concern for cities all around the world. "As major cities grow, the heavy reliance on private car ownership will not be sustainable. Uber Air holds enormous potential to help reduce road congestion," Allison said.

Uber is working with Boeing, Embraer, Bell, Pipistrel and Karem Aircraft to produce its electric flying taxis. Photo / Supplied

Uber Air would also drastically cut the time required to get from point A to B, he said. For example, eights minutes to get to Auckland CBD from Albany in the North Shore and nine minutes to Auckland Airport from the CBD.

"Uber's technology is changing the way people move around their cities," Allison said.

"In the coming years, with Uber Air, we want to make it possible for people to push a button and get a flight."

Government of Victoria assistant treasurer Robin Scott, who also spoke at the event, said the state of Victoria was delighted Melbourne had been selected as the first international market to trial and launch Uber Air.

Uber plans to develop a network of "skyports" - landing and take-off pads - located on the tops of buildings or next to transport hubs for its electric helicopter-like aircraft capable of accommodating up to five people. It is eyeing skyports on top of malls and car parking blocks - places that riders can easily access its flying taxis from.

An artist's impression of what an Uber Air skyport could look like. Photo / Supplied

Scentre Group chief strategy and business development officer, Cynthia Whelan, said the mall operator was pleased to have been selected to work with Uber Elevate and explore future mobility options for its customers.

"Today's announcement recognises the strategic locations of our Westfield centres, which are regarded as integral social infrastructure because of their close proximity to customers, communities and transport hubs."

Uber is working with Boeing, Embraer, Bell, Pipistrel Aircraft, Karem Aircraft and Jaunt to develop its fleet of electric aircraft.