London's Heathrow is falling behind rival European airports in the battle for lucrative routes to China because of the constraints on growth at Britain's largest airport, operator BAA said on Monday.

BAA, which was prevented by the UK government from building a third runway at Heathrow because of environmental concerns, said passenger traffic at its British airports edged up last month with Heathrow enjoying its busiest ever January despite a slight fall in traffic to China.

'Heathrow's China traffic in January, including Hong Kong, was down by 0.7 per cent versus the previous year. Through 2011 as a whole, Heathrow's China traffic was up 3 per cent versus 2010,' chief executive Colin Matthews said.

'This growth rate was well short of the growth generated by other European hubs, with Paris and Frankfurt growing at 9 per cent versus 2010 and Amsterdam growing at 6 per cent.'

Matthews added that the trend showed that capacity constraints at Heathrow, Europe's busiest airport, were 'damaging the UK economy when the country can least afford it.'

Heathrow is operating at full capacity after Britain's Conservative-led coalition government blocked development of a third runway when it came to power in 2010 as further expansion of the west London site would mean a huge increase in the number of planes flying directly over the capital.

London Mayor Boris Johnson has instead proposed building a new London hub airport in the Thames estuary.

There were 476,197 flights at Heathrow in 2011, representing 99.2 per cent of the airport's limit.

A recent study by the Frontier Economics consultancy said Paris Charles de Gaulle and Frankfurt airports boast 1,000 more annual flights to the three largest cities in China than Heathrow. It added that a lack of direct flights to emerging markets was costing the UK some 1.2 billion pounds a year as trade goes to better-connected competitors.

Earlier this month a report by business group London First said Britain should consider a new runway at Heathrow and allow planes to land and take-off simultaneously on its two runways.

The report, which criticised the government for ruling out expanding Heathrow for political reasons, said all options for meeting the UK's long-term need for further airport capacity, including a new airport, should be considered.

BAA is owned by a consortium of institutional investors led by 49.9 per cent shareholder Ferrovial, the Spanish transportation infrastructure group.

Ferrovial's shares in Madrid were flat at 9.48 euros, valuing the company at around 7 billion euros.

Analysts at BPI believe Heathrow has outperformed in spite of restrictions on its growth. It expects Heathrow traffic to increase by a further 1.6 percent in 2012, supported by the London Olympics.

BAA owns London's Heathrow and Stansted as well as Southampton, Glasgow, Edinburgh and Aberdeen airports but has been ordered by competition regulators to sell Stansted, having already sold London Gatwick in 2009.

BAA said it handled 7.5 million passengers in January, up 0.5 per cent. Heathrow served 5.2 million passengers last month, a record for January and up 2.3 per cent on a year ago. – Reuters