Investigators also said that after the plot did not succeed, the suspects tried to create an improvised chemical device meant to release "highly toxic hydrogen sulfide".
New South Wales counter-terrorism police have charged a 49-year-old man from Lakemba and a 32-year-old Punchbowl man arrested in raids last weekend across Sydney.
The 50-year-old man, who was not named, was released from police custody on Tuesday night, an Australian Federal Police statement said.
The two accused did not appear in court Friday and were represented by their lawyer.
"With assistance from the ISIL commander, the accused assembled the IED into what we believe was a functioning IED to be placed on that flight", said Phelan, referring to Islamic State by an alternative acronym.
"At the moment, all I can say is they are entitled to the presumption of innocence", their legal representative, Michael Coroneos, told CNN affiliate Sky News Australia.
Their brother-in-law Khaled Merhi remains in detention being questioned by police under specific provisions of the Commonwealth Crimes Act, which police said "recognises that terrorism investigations are inherently complex and that there can be legitimate reasons for extended periods of detention for suspects in such matters".
Both plans were foiled after Sydney police received a tip-off on July 26, leading to the arrest of the four terror suspects on July 29.More news: Economy adds jobs for eighth month in a row
"It didn't get through possibly because the baggage was too heavy, or possibly because the suspects backed out at the last moment" Mr Phelan said.
The plot targeted an Etihad Airways flight on July 15, but the bomb never made it past airport security.
The concerns came as Sydney's Daily Telegraph cited sources alleging the plot involved using an unwitting passenger to carry a bomb onboard, with Etihad Airways confirming this week it was helping the investigation.
Khaled Merhi, Khaled Khayat and Mahmoud Khayat remain in custody after the Federal Court granted a police application to keep the men detained for seven days.
Australian police have revealed alarming details about the terror plot to bring down a plane leaving Sydney for the Middle East.
"In response to these particular allegations, the Minister for Immigration and Border Protection [Peter Dutton] has instructed that there will be extra screening through air cargo", Keenan said, according to the Australian.
"It didn't get past the check-in", deputy commissioner Phelan said.
"Terrorism is very different to other crimes; you can not wait until you have the ideal brief, you can not wait until you have all the pieces of the puzzle because you can not afford to let the criminal act happen", he said.