Sustaining air services to peripheral regions Dr. George Williams Centre for Air Transport in Remoter Regions Contents • PSO rules • PSO application by country • Examples of innovative ideas: Knock airport North Cape airport Day trip adventures The PSO system • EU Member States have the legal authority to impose a PSO in respect to scheduled air services on routes serving peripheral or development regions within their jurisdiction. • PSOs can also be imposed on cross- border routes. Reasons for imposing a PSO • To link small or remote communities, and/or islands to economic and administrative centres • To connect small or remote communities, and/or islands to the TEN-T Networks and hub airports • To reduce peripherality and maintain social and/or political cohesion and integration Reasons for imposing a PSO • To sustain and develop economic activity and promote inward investment to development regions • To promote tourism and develop domestic as well as international transport Restrictions on imposing a PSO • A PSO can not apply to routes ‘where other forms of transport can ensure an adequate and uninterrupted service when the air service capacity exceeds 30,000 seats per year’. • However, the capacity on many PSO routes with good surface transport greatly exceeds this figure. Technical rules • Member states in preparing PSOs are required to issue a public invitation to tender which is published in the Official Journal of the European Communities. • The invitation to tender is open to all air carriers registered in the EEA and can be made in relation to a single route (or group of routes in the case of Norway). • The deadline for submitting tenders is one month after the day of publication. PSO tender usually covers: The minimum service levels in terms of capacity, frequency and scheduling which an air carrier would need to satisfy Any limits on the level of fares or specific fare types and rules, which must be adhered to Rules concerning any amendments, in particular termination of a contract as a result of unforeseeable changes in costs and demand Tendering Process • Initial tendering on the basis of no subsidy • If no carrier is willing to provide the level of service and fares without subsidy, then the tender is reissued • This time offering subsidy and limiting access to one carrier for a period of three years Tendering Process • Selection of the carrier takes into consideration the adequacy of the services being offered, the fares to be charged to passengers and the level of subsidy required, if any. • Selection must be made two months after submission of the proposal, so that other Member States have sufficient time to submit comments. Growing Number of PSOs 250 Number of domestic PSOs imposed 200 150 100 50 0 97 01 03 19 20 20 Source: Use and Reform of the Public Service Obligation, Corin Minshall, MSc thesis, 2004, Cranfield University Number of PSO Routes by Country in 2003 France 49 Germany 5 Iceland 1 Ireland 6 Italy 6 Norway 61 Portugal 10 Scotland 12 Spain 13 Sweden 11 PSO application in Norway – Southern routes Tender groups 11-15 PSO application in Norway – Central routes Tender groups 4-10 PSO application in Norway – Northern routes Tender groups 1-4 Norwegian PSO Routes 2003-2006 Route area Tendering carriers Winning tender 1 Widerøe, Arctic Air Widerøe 2 Widerøe, Arctic Air Widerøe 3 Norwegian, Widerøe, Kato Norwegian* 4 Norwegian, Widerøe, Kato Norwegian* 5 Widerøe Widerøe 6 Widerøe Widerøe 7 Kato, Arctic Air, Widerøe Kato Source: Ministry of Transport and Communications, Norway *Now operated by Widerøe Norwegian PSO Routes 2003-2006 Route area Tendering carriers Winning tender 8 Kato, Arctic Air, Widerøe Kato 9 Widerøe, Kato, Coast Air Widerøe 10 Widerøe, Arctic Air Widerøe 11 Danish AT, Widerøe, Coast Air Danish AT 12 Widerøe, Coast Air Widerøe 13 Widerøe, Coast Air Widerøe 14 Coast Air, Danish AT, European Coast Air Executive Express, Arctic Air 15 Widerøe, Coast Air, Danish AT, Widerøe European Executive Express, Kato Widerøe Dash 8-100 Kato Dornier 228 Annual Subvention levels on Norwegian PSOs 1997-2000 31.8 million euros 2000-2003 51.1 million euros 2003-2006 46.9 million euros PSO application in Sweden Swedish PSO Routes in 2003 Arlanda to: Carrier Aircraft Subsidy per passenger (euros) Hagfors Swedline Beech 1900 137 Torsby Swedline Beech 1900 137 Hemavan Swedline Saab 2000 224 Gallivare Swedline Saab 2000 81 Storuman Skyways Fokker 50 92 Umea to: Ostersund Nordic Saab 340 120 Lulea to: Pajala European Jetstream 510 Exec Exp Swedline Saab 2000 PSO application in Scotland Scottish PSO traffic, subsidy and operating data Route(s) Airline Aircraft Subsidy per passenger (euros) Glasgow Loganair Twin Otter 80.4 Benbecula - Highland Jetstream 32.2 Stornoway Orkney Loganair Islander 34.4 Inter-island Shetland Loganair Islander 71.2 Inter-island Data refers to year 2000 PSO application in Ireland Irish PSO tendering round 2002-2005 Dublin to: Previous Successful Current operator tender operator Derry Loganair Loganair Loganair Donegal Aer Arann Euroceltic* Aer Arann Galway Aer Arann Aer Arann Aer Arann Kerry Aer Arann Aer Arann Aer Arann Knock Aer Arann Aer Arann Aer Arann Sligo Aer Arann Euroceltic* Aer Arann * Euroceltic ceased trading during winter 2002 Aer Arann ATR 42 Loganair Saab 340 Subvention levels (000 euros) on Irish PSOs Dublin to Donegal Galway Kerry Sligo 1997 454 444 698 603 1999 1011 1364 956 874 2001 1802 3999 3441 2725 2003 2100 5105 4479 2700 Source: Department of Transport, Ireland PSO routes as a % of domestic seat capacity 40% 35% 30% 25% 20% 15% 10% 5% 0% nd ay ce * en K an w ed la U or Ire Fr Sw N Source: Use and Reform of the Public Service Obligation, Corin Minshall, MSc thesis, 2004, Cranfield University Imaginative ways to develop air traffic • Knock Airport • North Cape Airport • Day trips Knock knock what’s there? • An international airport on a foggy, boggy hill • Opened in 1986 serving a town with 400 people • Catholic shrine at Knock where Mary appeared to a group of children in 1879. • Only Marian shrine in Europe without a local airport • After Pope’s visit in 1979, local parish priest James Horan began a campaign for an airport at Knock to enable pilgrims to have easy access to the shrine Deemed a ‘Miracle of the 1980s’ • In 1981 Charles Haughey, the then Taoiseach and a Mayo man, promised a grant of 8 million punts for the airport following an extended lunch • Critics said it was the most expensive lunch Charlie had ever had! • He gave another 3 million punts when back in power a few years later. (In between, the Fine Gael Government had refused to provide funding for the airport.) • Monsignor Horan raised 4 million punts through raffles and dances (and collections in the US) Knock International Airport • 2300 metres runway • In 2001, 198,700 passengers • In 2002, 197,600 passengers • In 2003, 247,000 passengers • In 2004, 373,000 passengers Knock Scheduled Services Destination Airline Frequency Dublin Aer Arann Daily Birmingham MyTravelLite Daily bmibaby Daily Liverpool Aer Arann Daily London Gatwick Ryanair Daily easyJet Daily London Stansted Ryanair Daily Manchester bmibaby Daily Knock Summer Season Charter Destinations (2004 Charter traffic 58,700) Alicante Faro Lanzarote Malaga Palma Rome Knock Airport – key facts • 1.5 million pilgrims annually visit the Knock shrine • Knock village has a population of 1,400 • £50m Airport Business Park established in 2001 which was expected to create 2,000 jobs • 140 staff of Dept of Community, Rural and Gaeltacht Affairs relocated to Knock in 2004 • Minister Eamonn O’Cuiv views Knock Airport as a centre of development for all of Connachct region Knock Airport – Economic Impact • 100 full-time and 29 part-time jobs at the airport (373,000 pax in 2004) • Additional 56 jobs created supplying goods and services to the airport (32 indirect and 24 induced). The multiplier is therefore 1.56 • Airport’s contribution to GDP estimated at €6.5mn • 52% of passengers are inbound tourists staying an average of 6 days (VFR 26%, Business 12%) Knock Airport – Economic Impact • Total spend of inbound tourists using Knock airport is estimated at €37mn • Tourism spend by Knock airport passengers is estimated to support 584 jobs (482 direct, 102 induced) in the wider economy, of which at least 212 are in the catchment area of the airport • Knock airport was expected to return a profit of €437,500 in 2004 Source: Goodbody Economic Consultants, Dublin, 2004 North Cape Airport, Banak (Lakselv) • In 2002, 68,938 passengers • In 2003, 47,532 passengers • In 2004, 58,598 passengers • PSO services to Tromsø, Kirkenes, and Alta • Charter flights • Freight flights North Cape Airport Attractions • Northern most part of Europe’s mainland • Midnight Sun – 24 hour golf • Hurtigruta • Sami Culture • Fishing Orca Safari Day Trips Orca Safari Day Trips • From 11 UK airports to Harstad/Evenes • Departures at 05.00 throughout the autumn • Day trip for £289 (420 euros) • Also, weekend whale watching trips for £890 Why flying might be a more attractive option! But then again on a good day ….