Britain’s largest airlines want BAA’s control of Heathrow to be broken by a sale of individual terminals to rival companies, The Times has learnt.

Virgin Atlantic and British Airways are understood to have told the Competition Commission, which is investigating BAA’s monopoly control of London’s airports, that individual terminal owners would improve the level of service at Heathrow.

A similar system is used at a number of American airports, and airlines can negotiate better conditions and more space by threatening to shift operations to a new terminal.

Virgin is also understood to be proposing that BAA, which was bought by Ferrovial, the Spanish construction group, for £10.3 billion last year, be forced to sell Gatwick. British Airways wants the Government to force a sale of Stansted. Neither airline would comment on the proposals.

The Competition Commission inquiry will report next year and sources familiar with the hearings said that nearly every submission favours breaking BAA’s London monopoly.

Airline executives who use BAA’s facilities complain that they and their customers are being offered poor service by the company. They have accused BAA of putting profits and retailing ahead of investment in infrastructure. Airlines such as BA have also given warning that overcrowding and the Government’s new security restrictions on hand baggage are deterring people from travelling through the UK.

Ken Livingstone, the London Mayor, added to the criticism of BAA yesterday, saying that Heathrow “shamed” the British capital. “It’s quite clear that the current management, and the management before them, at BAA thought they could keep people almost as prisoner in this ghastly shopping mall so they can extract vast sums of money from them while they wait in appalling conditions,” he said.

Kitty Ussher, the City of London Minister, has also said that business could suffer if executives decide to go elsewhere to avoid chaos at Heathrow.

A BAA spokesman said: “We are not deaf to the concerns of business leaders about Heathrow and we have got a plan in place to address them.

We are adding Terminal 5 to increase capacity. Accusations that we are operating a shopping mall are misjudged. Revenue from retail operations enables us to keep landing fees low.”

Ryanair insists that landing fees at BAA’s Stansted are too high and is retaliating by grounding seven of its aircraft. The airline also accused BAA of an “appalling” service at the airport. Ryanair has yet to decide which seven routes will end this year, but it said that they were likely to be services to more “provincial” destinations in France, Spain and Scandinavia.

Michael O’Leary, Ryanair’s chief executive, said: “BAA Stansted’s doubling of airport charges since April has caused traffic declines for the first time in 15 years. The current service provided by BAA at Stansted is nothing short of appalling.”

On Monday, Giovanni Bisignani, the director-general of IATA, which represents 240 international airlines, criticised BAA for “embarrassingly low service levels”.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive