London’s Heathrow Airport has signed an agreement with airlines that will help increase passenger traffic, cut airport charges and drive investment and growth.

The new arrangement will extend the existing regulatory settlement to 2021 and includes an incentive by Heathrow for airlines to boost passenger numbers.

Heathrow said that the decision by airlines to fill their aircraft could facilitate further reduction in airport charges and help to deliver significant passenger benefits.

Airlines at Heathrow currently operate with average load factors below the IATA global average. Achieving global averages for filling aircraft is expected to reduce passenger charges by 10-20%.

With the arrival of more travellers, Heathrow can spread the development costs of expansion across a larger passenger base. It will enable the airport to keep charges close to 2016 levels in real terms throughout the expansion project.

“Over the past several months we’ve been working hard with our airline partners to agree a deal on airport charges to 2021.”

The UK Civil Aviation Authority (CAA) has supported the commercial arrangement and is likely to commence a public consultation on the solution in the coming weeks.

Heathrow CEO John Holland-Kaye said: “Over the past several months, we’ve been working hard with our airline partners to agree a deal on airport charges to 2021.

“We are delighted that the result is the first-ever commercial agreement at Heathrow, which will unlock hundreds of millions of pounds of potential investment for our passengers.

“We’ve shown that we can achieve more by working together and we will continue working to build on this momentum as we expand.”

International Airlines Group (IAG), the owner of British Airways, Iberia and Aer Lingus, recently lambasted the CAA for not negotiating a cut in passenger charges with London’s Heathrow Airport.

Heathrow Airport is home to more than 80 airlines and welcomes over 80 million travellers per annum.