Holidaymakers can expect the cost of their air fares to rise as a result of new charges on London's airports, it was announced today.

The Civil Aviation Authority (CAA), the regulatory body of the airline industry, said that airlines face increased charges for using Heathrow, Gatwick and Stansted airports. The charge is designed to help fund airport operator BAA's 10-year, £7.4bn investment plans, but it has outraged airlines who have already intimated that costs may be passed on to consumers.

The CAA said today that while it "fully recognised the current financial difficulties faced by some airlines" it would be failing in its statutory duties if it imposed a pricing regime that might delay BAA's investment programme.

This suggestion was rejected outright by Sir Richard Branson, chairman of Virgin Airlines. "This is sheer madness. At a time when fuel prices are at $40 a barrel and when BAA is still making massive profits, whoever suggested that it be allowed to raise charges to airlines by 40% must be off their heads.

"It begs the question - who regulates the regulators? We will fight this proposal tooth and nail or we'd have no choice but to pass these increases on in fares."

The CAA's decision today covers the five-year period from April 1 this year and states just how much BAA can charge airlines for using Heathrow, Gatwick and Stansted airports.

BAA can charge airlines the equivalent of £6.48 per passenger at Heathrow for 2003-04 and then increase this charge by as much as 6.5% over the rate of inflation each year until 2007-08.

The Gatwick figure is £4.32 per passenger in 2002-03 and then increasing each year in line with inflation; the Stansted figure is £4.89 per passenger in 2003-04 and then also increasing in line with inflation.

This compares with the 1999-2003 five-year policy which allowed for a 1% above-inflation rise at Stansted but below-inflation rises at Gatwick and Heathrow.

It is estimated that airport charges only represent 3%- 8% of airlines' total costs, and it is uncertain if airlines will raise fares or by how much.