Dulles International Airport is rapidly losing flights and passengers to Baltimore Washington International Airport and needs better promotion to stave off the increased competition, the airport's economic development commission said yesterday.

"It is critical that we establish" a state-financed promotion office at Dulles, said Sen. Adelard L. Brault (D-Fairfax), who is chairman of the commission, which met yesterday in Fredericksburg. "Dulles has the market and the facilities, but it is faced with aggressive competition."

Officials in both Virginia and Maryland are taking sides in that competition because of the economic development and tax revenues a busy airport generates.

In recent days three airlines have announced that they are transferring their flights from Dulles to BWI, and a fourth-- Trans World Airlines-- said that it is canceling all its 707 flights there because the high price of fuel has made them too costly to run out of Dulles.

The three airlines that are transferring their flights from Dulles to BWI are Delta, Piedmont and Ozark. Donald Morrison, a spokesman for Ozark, said his line was moving because BWI offered a better location.

The airlines are moving to BWI because its big potential passenger pool in the Baltimore area and many connecting flights can guarantee greater ticket sales. In the intense competition that has been fueled by deregulation, airlines are seeking the airports that attract the most passengers, the Virginia commission was told yesterday.

The commission's fears were echoed in Maryland yesterday by Karl Sattler, the state's aviation administrator, who predicted that Baltimore Washington would grow more rapidly than Dulles because of its location. BWI also offers airlines lower operating costs and more connecting flights carrying more passengers, than Dulles he said.

"It does not make sense to serve Dulles and National because if you do, you've cut yourself off from everything north of Prince George's County," Sattler said.

Murphy Dullum, a Delta Airlines vice president, said the company pulled out of Dulles because its traffic is "mostly north-south and Dulles lends itself primarily to east-west traffic."

Deregulation has not only been costly to Dulles but to many airports throughout Virginia. Newport News and Hot Springs have lost much of their service, and there have been cutbacks made or planned at Lynchburg, Danville, Charlottsville and Roanoke.

To combat this decline, the state Department of Aviation is setting up an air services division to help local airports hold onto their current business. The office proposed for Dulles would be under this division.

Dulles, despite its broad, roomy and instrument-landing-equipped runways and architecturally distinguished terminal designed by Ero Saarinen, has remained a stepchild to more cramped and dowdy Washington National Airport. National is closer to most of the Washington area's population and had 15 million passengers last year compared to 3.5 million at Dulles.

Because most passengers are drawn to National, Dulles has a meager schedule of domestic flights, including crucial connecting flights. Though it calls itself the "Gateway to the Nation," Dulles is losing international passengers to Baltimore-Washington International which has an aggressive promotion and facility construction program, both of which are financed by a state government that is dedicated to making the airport grow.

Brault said that under legislation that will be proposed by the commission-- and endorsed by Gov. John N. Dalton-- a state-financed office would be established at Dulles to promote the airport for both foreign and domestic flights. The office would be also claim that Dulles is an attractive connecting point for airlines looking for the most passengers per plane.

While BWI is promoted by the state of Maryland, Dulles' growth is dependent on funds from Congress and the Federal Aviation Administration, which owns it and National.

Under pressure from Congress, whose well traveled members want a wide array of domestic flights from National, the FAA has never developed an aggressive program to build up Dulles traffic.

Even if Virginia sets up an office at Dulles it is problematical whether it will turn around the developing trend of air traffic, which has seen both National and BWI grow at Dulles' expense.

Dulles will be less difficult to reach when the airport's access road is extended to the New Arlington-Fairfax leg of Interstate Rte. I-66, now under construction.But that is two years off.

Additionally the FAA has yet to release a long-promised master plan for National that could recommend major shifts of traffic from National to Dulles.