The aviation regulator will be given new powers to promote the interests of passengers, including the ability to fine airports for poor performance, according to proposals put forward by transport secretary Justine Greening.
The draft Civil Aviation Bill, published on Wednesday, is expected to replace the current system, under which the Civil Aviation Authority (CAA) regulates and controls pricing at Britain's largest airports.
It outlines plans for a new licensing systems for larger hubs and to allow the CAA to impose penalties of up to 10 percent of an airport's annual turnover.
The proposals are designed to modernise key elements of the regulatory framework for civil aviation in the UK, to enable the sector to increase its contribution to economic growth without compromising high standards, Greening said in a statement.
Much of our aviation regulation is governed by 1980s legislation and needs to be updated. This draft Bill offers a package of reforms to make both regulation and the sanctions which support it flexible, proportionate, targeted and effective.
The CAA will also oversee investment in airport improvements and provide airport users with information about airline and airport performance.
The draft bill also suggests that some aviation security functions be transferred to the CAA from central government. However, the responsibility for setting aviation security policy will remain with Greening.
Britain's two largest airports are Heathrow, run by Ferrovial unit BAA, and Gatwick, run by Global Infrastructure Partners.
(Reporting by Rhys Jones; editing by Adveith Nair)