Sustaining air services to perip

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					Sustaining air services
to peripheral regions

          Dr. George Williams
         Centre for Air Transport
           in Remoter Regions

• PSO rules
• PSO application by country

• Examples of innovative
   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
• 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

• 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
                                  Growing Number of PSOs
Number of domestic PSOs imposed









                                   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

Orkney          Loganair         Islander                  34.4

Shetland        Loganair         Islander                  71.2

           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

















  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

• 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)






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 ….