The European Single Air Transport MarketAn Empirical Approach on the Efficiency and Sustainability of Public Service Obligations in the Spanish Domestic Routes

Resumen

Sustainable mobility of freight and people (individuals) using efficient modes of transport is a key factor to achieve (overcome or triumph) the challenge of fundamental transport transformation faced by the European Union (EU) towards Sustainable Development Goals (SDGS) from the 2030 Agenda addressed by the United Nations (UN). The strengthening of intermodal transportation systems is a crucial element to running more efficient mobility according to the EU common transport policy; thus, stimulating a competitive transport industry within the European internal market. Public transportation also plays a vital role in achieving greater territorial cohesion, and therefore combating rural depopulation. However, some communities situated far from main transport hubs have traditionally suffered from the lack of accessible and affordable transportation, particularly those situated in peripheral regions. In the case of island territories and remote areas, air transport is often the optimal choice, among all possible transport modes, for its travel time and flight frequencies as it is often the only link to the mainland for essential mobility needs. Considering that air transportation is an essential service for such communities, especially those living in EU special territories, the free market system is not always capable of guaranteeing adequate transport modes in terms of availability, continuity, and prices. Since most carriers are mostly private-owned companies, they cannot be compelled to operate non-profitable routes. And, because the EU single market in aviation has been fully liberalized since 1 April 1997, the commercial provision of passenger air transport services is not within its sphere of competence of member states, due to a shortfall in aviation resources. To solve this market failure, the Public Service Obligation (PSO) schema has been introduced from the Articles 16-18 of the Air Services Regulation 1008/2008. Hence, the PSO may be designed on an air route in order to ensure scheduled transport services, either for people or goods, in cases duly justified by the public authority responsible for imposition on the basis of essential needs in the region concerned (either development or peripheral region, and thin route). This research aims to assess the efficient use of the PSO system, in combination with other forms of public actions in the aviation market, in order to ensure adequate regular passenger transport services for the domestic market in Spain. For this purpose, two main intervention forms (economic compensation and resident subsidy) have been analyzed. In addition to both public actions supported with state funding under European law, the study has extensively examined other public interferences at the regional level in the free market such as marketing contracts for promoting tourism and air links. All these ways of sustaining may be considered, in fact, legal instruments to guarantee freedom of movement for individuals and goods within the European Single Market. To that end, the PSO schema has been used so far as a remedy for the lack of scheduled air transport services on 176 air routes across thirteen EU state members (as of 18 September 2019). In the case of the PSO system so far implemented in Spain, 23 air routes have been analyzed in the period between 2004 and 2019, showing that, on the issue of sustainable mobility, the PSO schema can be extremely useful to maintain essential air transport services under certain circumstances for socioeconomic reasons in disadvantaged regions. These obligations, even in combination with resident subsidies, are more than sufficient to ensure basic air connectivity without the need to tender advertising contracts at a regional level. Furthermore, it is important to note that Spain has focused so far on peripheral and interisland routes. The study also indicates that the increase of resident subsidy occurred in 2018 up to a total of 75% over existing rates may have certain undesired effects on airfares for those non-resident passengers visiting both the Canary Islands and the Balearic Islands, as well as the two Spanish overseas territories in Northern Africa, Melilla, and Ceuta. The findings suggest that the future challenge should be addressed by stimulating the concurrence in the regional transportation system, even enhancing the intramodality between air and sea transport (for instance, through a combined ticket). Additionally, the existing resident subsidy system in Spain should be further studied to be amended towards a system based on various discounts depending on the income level of each eligible person instead of the current discount applied without distinction. With regard to sustainability, this study found that turboprops have been mostly operated rather than turbojets, while reducing pollutant emissions per passenger, as this type of aircraft is often much more efficient operating regional transport services, as short-haul routes up to 500 km, even with low demand. Regarding the impact of PSO air routes on the efficiency of transportation in Spain, this research has also found a strong relationship between the existence of routes characterized by strong seasonality due to the tourism effect and the need for PSO contracts by tendering regular air services in low demand periods. However, apart from the air route between Madrid and Menorca (ES03), all routes so far tendered (a total of 11) with PSO contracts have been awarded for the provision of regular services without restrictions in terms of seasonality. Finally, this research has also analyzed the impact of the COVID-19 on the passenger demand for regular transport services on certain PSO routes in Spain, particularly regarding the entry into force of the state of emergency from entire territory in Spain due to the pandemic during 2020. The disruptive effect of this worldwide event on the tourism sector is being particularly dramatic in the aviation sector, causing the loss of several air routes, some of them essential for regional economies. The findings suggest that a number of them shall need to be imposed with a PSO, and most likely tendered for the provision of passenger services serving less developed areas, as well as remote and island territories. This study should also shed some light on the details of how the PSO schema can face the challenge of moving towards a new scenario under stringent sanitary conditions.