Airline passengers are likely to see ticket costs rise by about £10 over the next five years after the Civil Aviation Authority said yesterday that BAA would be allowed almost to double landing charges at Heathrow and raise them by 50 per cent at Gatwick.

But athletes and spectators attending the London Olympics in 2012 will still be forced to travel through a dilapidated and overcrowded airport terminal because a £1 billion upgrade of Heathrow will not be finished in time.

The CAA said BAA, the Spanish-owned company that owns Heathrow, would complete the rebuilding of Terminals 1 and 2 at least six months later than it had promised. Last year BAA said: “It is our ambition to open phase one of Heathrow East in time for the London Olympics in 2012. It would be a great new gateway for the Games.”

The first phase of Heathrow East, a new building on the site of Terminals 1 and 2 with capacity for 30 million passengers, was due to open in June 2012.

The CAA said the opening date was now likely to be in December 2012.

BAA said last night that it still hoped some of the new terminal would be open in time for the Games, but it was unable to say how much. The new facility will feature faster and more reliable baggage delivery and security checking systems. The CAA, which regulates BAA’s monopoly over the three biggest airports in London, including Stansted, said that the company’s construction programme was unrealistic. It did not take sufficient account of the need to keep Heathrow running during the building work.

Passengers will benefit from a tightening of regulation on the length of security queues, cleanliness and the availability of key systems such as lifts, escalators and moving walkways.

BAA will be fined if it fails to keep queuing time at security checkpoints below five minutes for 95 per cent of the whole day. The current standard is ten minutes for 95 per cent of the time at peak periods.

The CAA is also more than doubling the maximum annual fine for breaching service standards to £63 million at Heathrow and £17 million at Gatwick. BAA will be able to earn a bonus for exceeding the targets. The CAA admitted that it relied on BAA’s own records of its performance on service quality. The regulator plans to carry out an audit next year to establish if the records are accurate.

“Airlines condemned the increase in landing fees and accused the CAA of rewarding BAA’s inefficiency. British Airways said that the CAA had “caved in to intense pressure from BAA by setting excessive price increases”. In a joint statement, four airlines – Virgin Atlantic, bmi, Ryanair and easyJet said that BAA’s monopoly should be broken up and the CAA regulatory role reformed because it was not protecting consumers.

Nigel Turner, chief executive of bmi, said that the failure to complete Heathrow East in time for the Olympics was an embarrassment for Britain and demonstrated the CAA’s inability to hold BAA to account. He said: “The regulator does not have the commercial acumen to challenge BAA. It’s an adversarial relationship under which BAA does nothing unless it is pushed by the regulator. But it’s a heavyweight fighting a middleweight.”

Tim Jeans, managing director of the airline Monarch, said that the CAA announcement was more about helping Ferrovial, BAA’s parent company, to cope with its huge debts than about ensuring better service for passengers.

The Competition Commission is investigating BAA’s dominance of airports in London and Scotland and is expected to publish its interim findings next month and a final report in December. Heathrow’s Terminal 5, to be used exclusively by British Airways, will open to passengers on March 27.

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