The government has given the go-ahead for a third runway and sixth terminal at Heathrow.

Transport secretary Geoff Hoon said expansion was necessary as the airport was "critical to this country's long-term economic prosperity". It needed to grow because it was at 99% capacity and was losing ground to international competitors.

The government is also setting up "High Speed 2", a company to look at the potential of building a new high-speed rail link from London to Scotland, via a Heathrow hub station.

That move is designed to counter environmental objections to the third runway and steal political ground from the Conservatives, who have already promised a new high-speed rail link.

The government is also attempting to appease environmental concerns by giving the newest, least-polluting aircraft first call on using the new runway.

Initial use of the third runway will be also limited so the total increase does not exceed 125,000 a year, almost half the extra capacity originally proposed.

Hoon rejected “mixed-mode” operations, which would have seen the two existing runways to be used for take-off and landing at the same time, saying he instead wanted the third runway to be built as soon as possible.

The official timetable for the new runway envisages construction starting in 2015 and completion by 2019.

However, it will face legal challenges and direct action by environmental campaigners so is likely to take much longer.

BAA chief executive Colin Matthews said the decision opened the door to Heathrow becoming a “truly world-class hub airport”.

"Meeting the environmental targets will be demanding, but, while we have to study the detail in today's announcement, we are determined to work with the rest of the aviation industry to achieve them,” he said.

BMI chief deputy chief executive Tim Bye said the decision would safeguard the jobs and commercial benefits that Heathrow brought.

“If Heathrow’s development was denied, it would have a far reaching impact on the whole economy of the UK. However, we fully support and endorse that any expansion must be kept within clear environmental guidelines and limitations,” he said.

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