Heathrow reportedly plans to build a mini version of Terminal 5 as part of slimmed-down proposals to expand Europe’s biggest airport.

The west London hub is considering constructing a new terminal a few hundred metres west of T5 to handle 25 million passengers a year as part of updated plans for a third runway, The Times reports today.

Heathrow is also planning to phase all building work over as many as 15 years to reduce the cost of expansion by about £2.5 billion. The plan will be one of a series of options put to public consultation in mid-January.

Heathrow says that the proposals would bring the total cost down to about £14 billion, allowing the airport to keep passenger landing charges close to current levels.

Airlines have been concerned that Heathrow’s private owners would increase charges to pay for the project, potentially pricing out many passengers.

At present fees add £21.75 to the price of each ticket.

Transport secretary Chris Grayling has indicated that keeping landing charges flat would be a condition of building a third runway.

The proposals have to pass a parliamentary vote early next year and be approved by planners in the 2020s.

The Commons transport select committee is to start taking evidence today from airports and airlines to discuss the wider implications of an expanded Heathrow in the second hearing in the Airports National Policy Statement inquiry.

The two-mile runway would be built to the north-west of the airport and would allow it to increase annual flights by 54%, from a maximum of 480,000 to 740,000.

It was previously assumed that a new terminal would be built close to the north-west runway. Heathrow is preparing to rule this out because of the added cost of building underground passageways and baggage handling systems that link to the rest of the airport.

Heathrow is now exploring a number of alternatives, including building a wholly new terminal west of T5, according to the newspaper. They would share a Crossrail and London Underground station to hold down costs.

Any comparison with T5, which cost £4.2 billion and was delayed by a four-year planning inquiry, could cause major concerns.

However, Heathrow insists that the new terminal would be smaller, catering for 25 million passengers compared with 35.5 million at T5. It would be built in two blocks, creating an initial facility for 15 million.

Heathrow intends to expand Terminal 2 to accommodate an additional 15 million passengers. Work is due to begin in 2021, with the third runway operational by the end of 2025. All new terminals are expected to open by 2035.

British Airways parent company International Airlines Group said that costs remain too high.

In a submission to a parliamentary inquiry it said: “Heathrow’s price of £14 billion remains astonishing and comes with significant delivery and cost risk.”

Heathrow today confirmed it was planned to reposition new buildings over existing public transport and baggage infrastructure.

This includes building additional capacity at both Terminals 2 and 5 rather than a dedicated terminal or satellite building between today’s northern runway and the new north-west runway.

Heathrow executive director expansion Emma Gilthorpe confirtmed: “The secretary of state set us the challenge to deliver an expanded airport for Britain with passenger charges staying close to current levels.

“We have now identified potential savings of £2.5 billion and are increasingly confident we can meet the affordability challenge.

“We are looking forward to presenting detailed options on how to do it in our consultation in January, and while we will continue to work to reduce the cost of expansion, we will not compromise on our local commitments.”