Air travel demand forecasting in the presence of Public Service Obligation (PSO)

Knowing the potential evolution of air transport demand is necessary in order to ensure the positive effects that are generated by air transport itself, in terms of economic and social development. There are several air transport demand forecasting models, which differ from each other in terms of time, available data and the aspects to be analysed. The aim of this study is to create forecasts that can help government authorities to formulate air transport development policies. This paper focuses on a regional context — Sardinia — the second largest island in the Mediterranean. A large part of its economic and social development potential (tourism-related) is based on breaking its isolation by substantially improving air transportation services. In particular, the originality of these forecasts lies in the attempt to interpret a context characterised by different factors influencing the air transport market. Public Service Obligation (PSO) (Art. 4 RC 2408/92) was first imposed in Sardinia in 2002, on several domestic routes. Low cost companies have been operating since 2007, and some of them took advantage of public subsidies to develop new routes. During the same period, the three major Sardinian airports were expanded and improved. This paper provides a detailed, descriptive analysis of air transport demand evolution at Cagliari’s airport (1995–2014). Based on this analysis, several regression models for aggregate data have been specified and calibrated, distinguishing between domestic and international passengers.