Slot premium: London Heathrow versus London Gatwick
by Chunyan Yu; Bijan Vasigh
International Journal of Aviation Management (IJAM), Vol. 2, No. 3/4, 2015

Abstract: This paper provides a historical review of slot trades and transactions at London Heathrow Airport, and conduct an empirical analysis of revenue premium of flights out of Heathrow over Gatwick to see whether the sale prices of British West Indian Airways (BWIA) and Air Jamaica's Heathrow slots reflect the revenue premiums. Our results show that the average yield for short haul flights out of Heathrow more than doubles that for flights out of Gatwick, whereas the average yield for long haul flights out of Heathrow is about 11% higher than that out of Gatwick. Overall, the average yield for flights to/from Heathrow is about 45% higher than that for flights to/from Gatwick. The present values of the revenue premium of BWIA and Air Jamaica's Heathrow slots are estimated at £78 million and £83 million at 8% discount rate, respectively. Therefore, the sale prices of £5 million and £5.1 million for these slots in 2006 and 2007 appear to be undervalued.

Online publication date: Sun, 11-Oct-2015

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