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European Experience with Direct Subsidization of Air Services

Author

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  • George Williams

Abstract

Major differences in the application of the public service obligation (PSO) mechanism in air transport across EU member states give rise to questions as to its misuse. Variations in the levels of subsidy awarded per passenger are due in part to the large differences in the maximum fares that carriers can charge. This article explains why the current European PSO legislation needs to be amended; ideally, the whole system requires proper enforcement at Commission level. While the latter is unlikely, the author shows how the PSO mechanism could be amended to prevent its misuse, reduce subsidy levels and encourage innovation.

Suggested Citation

  • George Williams, 2005. "European Experience with Direct Subsidization of Air Services," Public Money & Management, Taylor & Francis Journals, vol. 25(3), pages 155-161, June.
    • Handle: RePEc:taf:pubmmg:v:25:y:2005:i:3:p:155-161
    DOI: 10.1111/j.1467-9302.2005.00468.x
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    References listed on IDEAS

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    1. Williams, George & Pagliari, Romano, 2004. "A comparative analysis of the application and use of public service obligations in air transport within the EU," Transport Policy, Elsevier, vol. 11(1), pages 55-66, January.
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    Cited by:

    1. Mueller, Falko, 2021. "Accessibility for money? An evaluation of subsidized air transport services in Europe and the United States," Transport Policy, Elsevier, vol. 106(C), pages 153-164.
    2. Wu, Hanjun & Hong Tsui, Kan Wai & Ngo, Thanh & Lin, Yi-Hsin, 2020. "Impacts of aviation subsidies on regional wellbeing: Systematic review, meta-analysis and future research directions," Transport Policy, Elsevier, vol. 99(C), pages 215-239.
    3. Valido, Jorge & Pilar Socorro, M. & Hernández, Aday & Betancor, Ofelia, 2014. "Air transport subsidies for resident passengers when carriers have market power," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 388-399.
    4. Merkert, Rico & Williams, George, 2013. "Determinants of European PSO airline efficiency – Evidence from a semi-parametric approach," Journal of Air Transport Management, Elsevier, vol. 29(C), pages 11-16.
    5. Abreu, José & Fageda, Xavier & Jiménez, Juan Luis, 2018. "An empirical evaluation of changes in Public Service Obligations in Spain," Journal of Air Transport Management, Elsevier, vol. 67(C), pages 1-10.
    6. Santana, Isabel, 2009. "Do Public Service Obligations hamper the cost competitiveness of regional airlines?," Journal of Air Transport Management, Elsevier, vol. 15(6), pages 344-349.
    7. Kinene, Alan & Granberg, Tobias Andersson & Birolini, Sebastian & Adler, Nicole & Polishchuk, Valentin & Skoglund, Jean-Marie, 2022. "An auction framework for assessing the tendering of subsidised routes in air transportation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 159(C), pages 320-337.
    8. Fageda, Xavier & Jiménez, Juan Luis & Díaz, Carlos, 2012. "Fare differences between domestic and international air markets on routes from Gran Canaria," Journal of Air Transport Management, Elsevier, vol. 25(C), pages 8-10.
    9. Smyth, Austin & Christodoulou, Georgina & Dennis, Nigel & AL-Azzawi, Marwan & Campbell, Jonathan, 2012. "Is air transport a necessity for social inclusion and economic development?," Journal of Air Transport Management, Elsevier, vol. 22(C), pages 53-59.
    10. Xavier Fageda & Juan Luis Jiménez & Carlos Díaz Santamaría, 2012. "“Price differences between domestic and international air markets: an empirical application to routes from Gran Canaria”," IREA Working Papers 201207, University of Barcelona, Research Institute of Applied Economics, revised Mar 2012.
    11. Francesco, Antonio Di & Pagliari, Romano, 2012. "The potential impact of removing public service obligation regulations on air fares between the Italian Mainland and the island of Sardinia," Journal of Transport Geography, Elsevier, vol. 24(C), pages 332-339.
    12. Salesi, Vinolia Kilinaivoni & Kan Tsui, Wai Hong & Fu, Xiaowen & Gilbey, Andrew, 2022. "Stakeholder perceptions of the impacts of aviation subsidies in the South Pacific Region," Journal of Air Transport Management, Elsevier, vol. 103(C).
    13. Joan Calzada & Xavier Fageda, 2012. "Discounts and Public Service Obligations in the Airline Market: Lessons from Spain," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 291-312, June.
    14. Leão e Silva, Celso José & de Andrade, Maurício Oliveira & Falcão, Viviane Adriano & da Silva, Carlos Fabricio Assunção, 2022. "The geographical characteristics of subsidized air routes serving as lifelines," Journal of Air Transport Management, Elsevier, vol. 104(C).
    15. Pita, João P. & Adler, Nicole & Antunes, António P., 2014. "Socially-oriented flight scheduling and fleet assignment model with an application to Norway," Transportation Research Part B: Methodological, Elsevier, vol. 61(C), pages 17-32.
    16. Jorge Valido & M. Pilar Socorro & Aday Hernández & Ofelia Betancor, 2012. "Subsidies for resident passengers in air transport markets," Working Papers 2012-10, FEDEA.

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