Heathrow Airport’s plan for a third runway, which involves moving the M25 motorway, has been chosen by the government.

Two plans had been under consideration – one from the airport itself, and another from Arora Group, led by hotel tycoon Surinder Arora.

Heathrow had proposed a new runway which would be up to 3.5km (2.2 miles) long and require a new road tunnel under the airport. The rival bid from Arora Group would have involved a shorter runway at a lower cost, and did not require altering the M25.

A final decision on whether a third runway will get the green light is still years away.

Last month, the government asked for further information to help choose between the Heathrow and Arora schemes.

The Department for Transport said Heathrow’s own proposal offered the most deliverable option, and the “greatest likelihood” of getting a decision on planning approval within this parliament.

The plan that has been backed will inform the government’s review of the Airports National Policy Statement.

Once that is complete, Heathrow is expected to apply for planning permission. The government then hopes for a decision by 2029.

But any company will be able to submit an application to build the new runway and terminals at the site.

Heathrow had set out its plans for expansion in the summer. The whole project, which is expected to cost £49bn, includes:

• the new runway, which Heathrow says will increase capacity to 756,000 flights and 150 million passengers a year. It currently serves about 84 million
• a new terminal called T5X, expanding Terminal 2 and three new satellite terminals. It would close Terminal 3
• enhancement of local rail connections and improvements to Heathrow’s bus and coach stations
• diversion of the M25, which would involve a new road tunnel under the airport, and widening the motorway between junctions 14-15

The Arora Group said it accepted the government’s choice, adding it welcomed the decision to leave the option open for other firms to bid for the work.

“It’s imperative there is a clear and transparent process for selecting a promoter to ensure it best serves the interests of consumers,” the group said.

Transport Secretary Heidi Alexander said Heathrow was the UK’s only hub airport that supported trade, tourism and jobs.

“Today is another important step to enable a third runway and build on these benefits, setting the direction for the remainder of our work to get the policy framework in place for airport expansion,” she said.

“This will allow a decision on a third runway plan this parliament which meets our key tests including on the environment and economic growth.”

When Heathrow had set out its plans in the summer, it said expansion was urgently needed as the airport was working at capacity, “to the detriment of trade and connectivity”.

Business groups had also backed the expansion, saying it would bring benefits for businesses and exporters, by opening up access to markets and encouraging investment.

The government has already approved a string of other airport expansion plans, including a second runway at Gatwick Airport.

However, the Heathrow plans face opposition from environmental groups, politicians, and local residents.

Tony Bosworth, climate campaigner at Friends of the Earth, said the plan would mean “more noise and air pollution for local communities”.

“Expanding Heathrow simply isn’t compatible with our legally binding climate targets, even if the government meets its hugely optimistic assumptions for emerging technologies, such as sustainable aviation fuels,” he said

Justine Bayley, who lives in Harmondsworth, says her house would be 50 paces from the boundary of the new airport, making her home effectively uninhabitable.

“Unless both Heathrow and the government say black is white, I don’t believe they can actually demonstrate that the benefits of this and the lack of pollution and greenhouse gases and all the rest of it are within acceptable limits,” she told the BBC.

The Mayor of London, Sir Sadiq Khan, said he thought the government’s backing of a new runway was a mistake.

“I want a better Heathrow, not a bigger one… I’m unclear how you get a new runway at Heathrow and it doesn’t cause environmental damage, noise pollution, air pollution being exacerbated.”

In reaching its decision, the government said that Heathrow’s runway plan was better developed and, while it required “major works” to the M25, the rival Arora scheme would also have had a “considerable impact” on the motorway.

It added that while the Heathrow proposal requires more land, it involves the acquisition of fewer houses around the airport than Arora’s plan.

The government also said the longer runway would provide “greater resilience and potential futureproofing for next-generation aircraft”.

A spokesperson for Heathrow welcomed the decision but said it needed “clarity as to how the crucial next phase of the project will be regulated”.

The airport is seeking reassurance that it will be allowed to increase its fees by enough to cover the cost of the planning application, which it says it will have to start very soon to meet the government’s timetable.

Earlier this month, the chief executive of British Airways, Sean Doyle, told industry members and MPs that Heathrow should be expanded without moving the M25.

“I think we should look at ways of potentially building a shorter runway,” he said.

Some airlines are concerned that the cost of building the third runway will make the airport more expensive for them, and ultimately for customers.