Spillover effects of the development constraints in London Heathrow Airport

• Heathrow’s development constraints are felt within its multiple airport region and elsewhere in the country.
• An innovative methodology, derived from Finance analysis, is used to identify the strength of these effects.
• There is a significant spillover between Heathrow and Gatwick for intercontinental traffic.
• Significant spillover effects are also felt at Manchester and Birmingham.
• Spillovers are not as important for European traffic.

In this article we assess the growth impact of London Heathrow’s development constraints on other airports in the UK. To test the relationship we use a two-stage methodology yielding an estimate of a congestion spillover effect. Our data are passenger traffic from 1990 to 2012 containing both intercontinental and European air traffic. For intercontinental air traffic, our results show high congestion spillover effect between Heathrow and Gatwick airports, and significant but lesser effect to Stansted airport. We also find significant congestion spillover effects from Heathrow to the spatially more distant Manchester and Birmingham airports, showing the extensive spatial impact of Heathrow’s development constraints. For European air traffic, controlling for low-cost air carrier growth, only two airports show significant congestion spillover effects: Gatwick and London City Airports. Illustrating that low-cost carriers do not operate from Heathrow, so its limitations cannot affect the predominant low-cost air traffic in other airports. The novel methodology we present in this paper can be applied to congestion research in general to assess regional and modal spills within networks.