It makes perfect sense to have a collective code for airports serving the same town. If you want to look up connections from London (any airport) to New York (any airport) you type LON-NYC and it gives you the lot. Much easier than having to look them all up individually.

Furthermore, I understand that the collective code is used for fare calculations which means that a flight to LHR returning from LGW is classed as a point-to-point return flight rather than an open jaw.

There are, of course, some anomalies in this... LGW and STN, both "London" airports, are further from each other than LGW is from SOU or STN is from NWI