Antonio Di Francesco MSc in Air Transport Management 2007-2008, Cranfield University, UK

AIR TRANSPORT PUBLIC SERVICE OBLIGATIONS IN EUROPE: AN ANALYSIS OF THE SARDINIAN CASE

Università degli Studi di , Facoltà di Ingegneria Lunch Seminar 27 May 2009 PRESENTATION OUTLINE - OBJECTIVES

TODAY WE WILL SEE… • What is meant by Air Transport Public Service Obligations (PSOs) • How the European PSOs legislation is implemented on several routes between SdiiSardinia an d ma ildItlinland

• What is the impact of PSOs on these routes? analilysis o f : ¾ travel demand / flight supply ¾ aircraft load factors ¾ fares / flights accessibility

• The role of the Sardinian PSOs routes for the island’ s air transport connectivity

OBJECTIVES… • What is likely to happen in case of a PSOs lifting? • Are Sardinian PSOs worth being maintained / implemented?

Presentation based on the Author’s MSc Thesis in Air Transport Management at Cranfield University, UK (soon accessible on-line, see references) THE REGULATORY FRAMEWORK

• Air Transpppyg,ort within the EU / EEA is disciplined by the EEC Regulation 1008/2008, (which replaced the Council Regulations C2407/92, C2408/92, C2409/92)

• Air Transport Public Service Obligations Regulations (“PSOs”) are also disciplined by this Regulation

• Air Transport in Europe is liberalised

• EU / EEA airlines … • have free access to any route within the EU/EEA ( flies -Bergamo!) • can decide the fares • have to comply with common rules concerning safety, training, finance etc. • are not allowed to receive public subsidies • must therefore pursue efficiency and focus on profitable routes

• Public Service Obligations are the exception… THE REGULATORY FRAMEWORK (II)

• PSOs are sppgyecial regulatory conditions which EU/EEA Member States or Re gional Authorities may impose on the scheduled air services to a peripheral or development region or on a thin route to any EU-EEA airport which is vital for the economic and social development of the region served by this airport

• PSOs may fix standards of continuity, regularity, pricing and minimum capacity which airlines would not satisfy if solely considering their commercial interest

• If no airline accepts to operate a PSOs route meeting the PSOs requirement, the access to the route may be limited to only 1 EU-EEA airline, for max. 4/5 years

• The airline is selected through a Public Tender at Community level and may be granted a monetary compensation (route-related)

• PSOs guarantee vital air services which airlines would axe and/or enable to meet fixed quality standards on these services

• They compensat e th e possibl e d rawb ack s of lib era lisa tion PSOs in EUROPE

• PSOs are currentlyyp imposed on 257 routes in 13 Euro pean Countries , thou gh to ver y different extents

• and Norway make an extensive use of the PSOs regulation

• and the UK are much more restrictive with regard to the PSOs (Spain often adop ts the “S oci al Aid S ch eme” : f ree mark et , b ut speci al di scount s f or “ eli g ible passengers”)

• In Italy PSOs are currently imposed or about to be imposed on 16 routes between Sardinia and Mainland Italy/Sicily + on the following 17 routes:

¾ Albenga - Rome Fiumicino (FCO) ¾ Crotone - Rome / ¾ Cuneo - RFiii(FCO)Rome Fiumicino (FCO) ¾ Elba - Florence / Pisa ¾ Lampedusa - / / Roma / Trapani ¾ Pantelleria - Palermo / Roma / Trapani ¾ Trapani - Bari / Catania / Milan / Rome Sardinia PSOs routes:

Cagliari Rome Fiumicino Milan Linate Bologna Turin Florence Naples Palermo

Olbia Rome Fiumicino Milan Linate Bologna Verona

Alghero Rome Fiumicino Milan Linate Bologna Turin

Map Source: Assessorato ai Trasporti, Regione Autonoma della Sardegna, 2007 SARDINIA’S PSOs

• Restricted access, subsidized routes: ¾ Cagliari - Florence / Naples / Palermo ¾ Alghero - Bologna / Turin ¾ Olbia - Verona

• Airlines involved / routes ¾ : all routes excl. those to/from Alghero ¾ /: Alghero routes + Cagliari - Rome FCO / Milan LIN ¾ Blue Panorama: Cagliari - Rome FCO (code share with Meridiana)

• On the Rome/Milan routes PSOs were introduced in 2002 and were renewed in 2006 and 2008 (will expire in 2009); we will focus on the “2nd PSOs” 2006-2008

• On the other “regional” routes, PSOs were introduced in 2007 and will expire in 2010

• Rome Ciamp ino, Milan Ma lpensa an d Milan Or io a l Ser io a irports were inc lu de d t ill October 2007

• Non-subsidised PSOs services to FCO and LIN now coexist with “free market” services to Ciampino, Malpensa and Orio SARDINIA’S PSOs REQUIREMENTS COVER…

¾ FfflihtFrequency of flights

¾ Capacity to be offered

¾ Schedules / times of flights

¾ Punctuality / regularity of service

¾ Duration of service

¾ Ticket distribution and selling channels

¾ Fares requirements FREQUENCY / CAPACITY REQUIREMENTS

• Minimum number of daily flights and minimum daily capacity fixed for each route (depending on season/days of the week) • Demand must match supply • Airlines may increase supply if total daily load factor is > 80%,

min one-way daily min daily seat flights capacity Cagliari-Rome FCO 10 - 14 960 - 2,110

Olbia-R ome FCO 383 - 8 370 - 1 ,200

Alghero-Rome FCO 3 - 5 370 - 720

Cagliari-Milan LIN 5 - 9 700 - 2,420

Olbia-Milan LIN 3103 - 10 230 - 2 ,150

Alghero-Milan LIN 2 - 3 270 - 720

Other routes 1 - 2 depends Source of data: EU Commission Notice 2008/C 232/05 SCHEDULES, PUNCTUALITY, DISTRIBUTION, DURATION REQUIREMENTS

• Airlines must offer flights within fixed time frames • One-day trips in mainland Italy must be granted • Alghero-Milan Linate time frames: 2fliht2 flights 3fliht3 flights

Alghero-Milan LIN 7.00 - 7.30 7.00 - 7.30 19.30 - 20.00 13.00 - 13.30 19.30 - 20.00

Milan LIN-Alghero 9.00 - 9.30 9.00 - 9.30 21.00 - 21.30 15.00 - 15.30 21. 00 - 21. 30 Source of data: EU Commission Notice 2008/C 232/05

• At least one ticket sale channel must be free of charge and airlines must distribute through at least one CRS (Computer Reservation System) • Airlines must operate for min. 12 months, cannot cancel more than 2% of flights, penalties in case of delayed flights FARES REQUIREMENTS

• A fixed fully flexible fare (“maximum concessionary fare”) must always be available for the following “eligible passengers”:

¾ Sardinian residents ¾ Disabled passengers ¾ Passengers of between 2 and 21 years of age or above 70 years of age ¾ UiUnivers ity s tdtuden ts up to 27 years o f age ¾ Passengers who are born in Sardinia (lifted / about to be lifted)

ONLY FOR THE “REGIONAL” ROUTES:

• For all passengers, ticket prices must not exceed a fixed, always available fully flexible “maximum non concessionary” fare (lower promotional fares are allowed)

• Till O ctob er 2008 ai rli nes were boun d to a “max. non concess ionary fare ” (ava ila ble for all passengers) also on the Rome/Milan routes… • …The “max. non concessionaryygp fare” is one of the most interesting aspects of the fare requirements FARES REQUIREMENTS (II)

MAX. NON CONCESSIONARY FARE: still available on all routes in Summer 2008 and included in the present analysis

▼Sardinia’s PSOs max one-way fares Aug 08 (excl. airport taxes/charges)▼ Maximum Maximum Route concessionary fare non-concessionary (including VAT) fare (including VAT)

Sardinia Rome FCO (or vice versa) 50 € 112 €

Sardinia Milan LIN (or vice versa) 61 € 128 €

Sardinia Bologna (or vice versa) Florence (or vice versa) Naples (or vice versa) 61 € 108 € Palermo (or vice versa) Turin (()or vice versa) Verona (or vice versa)

Source of fares: airlines websites, August 2008 PSOs EFFECT ON SARDINIAN ROUTES

• Schedu led t ra ffic, capac ity a nd load facto r an al ysi s of th e Sar dini an P SOs routes and of 69 Italian domestic North-South routes

• Fares recording of 220 round trip combinations to/from Sardinia from March to July 2008

• Air Connectivity Analysis of Sardinia - role of the mainland Italy PSOs destinations as connecting points for reaching further destinations TRAFFIC, CAPACITY, LOAD FACTOR ANALYSIS

• Scheduled traffic figgjyures were not available for the majority of the routes: In Italy, route-related traffic data are not public when routes are operated by only one airline (Decreto Legislativo n.322, Article 9, 06/09/1989)

• Scheduled traffic figures were calculated using Eurostat, ISTAT, OAG and ENAC data (need to estimate and to exclude the non-scheduled traffic figures: passengers of charter and corporate/general aviation flights)

• Capacity Analysis: OAG data estimated monthly scheduled passengers • Average monthly load factors = monthly seat capacity

• Traffic and load factor seasonality measured by standard deviation statistics (σ) SCHEDULED PASSENGERS PERFORMANCE SARDINIA - ROME FCO / MILAN LIN

CliiRCagliari-Rome FCO - 620%6.20%

Olbia-Rome FCO - 3.52%

Alghero-Rome FCO + 3.47%

Cagliari-Milan LIN + 5.48%

Olbia-Milan LIN + 11.36%

Alghero-Milan LIN + 40.54%

0 100 200 300 400 500 600 700 800 900 1,000 annual passengers (000)

May 05 - April 06 May 06 - April 07 Source: Auth or, compil ed f rom d at a provid ed b y E urost at , OAG , ISTAT , ENAC

Average % change of 69 domestic Italian North-South: + 7.25% SCHEDULED PASSENGERS PERFORMANCE ALGHERO - MILAN LIN 2000-2007

• Passenggygppyer demand is influenced by flights supply

ALGHERO-MILAN LINATE SCHEDULED PASSENGERS/SEATS 40,000

35,000

30,000 ats ee 25,000

20,000 ed pass./s

15,000

schedul 10,000

5,000 ▲2nd PSOs start

0 44 44 55 55 66 66 77 00 00 11 11 22 22 33 33 44 44 55 55 66 66 77 00 00 11 11 22 22 33 33 Jul-0 Jul-0 Jul-0 Jul-0 Jul-0 Jul-0 Jul-0 Jan-0 Apr-0 Oct-0 Jan-0 Apr-0 Oct-0 Jan-0 Apr-0 Oct-0 Jan-0 Apr-0 Jan-0 Apr-0 Oct-0 Jan-0 Apr-0 Oct-0 Jan-0 Apr-0 Oct-0 Jan-0 Apr-0 Oct-0 Tot. estimated scheduled pass. on boardScheduled seats Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC TRAFFIC SEASONALITY SARDINIA - ROME FCO / MILAN LIN • The 2nd PSOs generally did not contribute to the de-seasonalisation of traffic flows reltilative s tan dar ddd dev itiiations (σ) o fthf the est . monthl y sc hdldheduled passengers: May 05 - April 06 May 06 - April 07 Cagliari-Rome FCO σ as % of the average 11.51% 13.45% monthly passengers Olbia-Rome FCO σ as % of the average 23.11% 23.10% monthly passengers Alghero-Rome FCO σ as % of the average 17.25% 13.87% monthly passengers Cagliari-Milan LIN σ as % of the average 10.89% 21.34% monthly passengers Olbia-Milan LIN σ as % of the average 30. 97 % 42.68% monthly passengers Alghero-Milan LIN σ as % of the average 14.20% 13.45% monthly passengers Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC SCHEDULED PASSENGERS PERFORMANCE OLBIA - MILAN LIN 1999-2007

• The 2nd PSOs did not “de-seasonalize” the traffic flows

OLBIA-MILAN LINATE SCHEDULED PASSENGERS / SEATS 70,000

60,000

50,000 eats

40,000 ed pass./s

ll 30,000

20,000 schedu

10,000 ▲2nd PSOs start 0 3 4 4 4 5 5 5 6 6 6 7 7 9 9 9 0 0 0 1 1 1 2 2 2 3 3 3 4 5 6 9 0 1 2 00 00 00 00 00 00 00 00 00 00 00 00 99 99 99 00 00 00 00 00 00 00 00 00 00 00 Jul- Jul- Jul- Jul- Jul- Jul- Jul- Jul- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Oct-0 Oct-0 Oct-0 Oct-0 Oct-9 Oct-0 Oct-0 Oct-0 Tot. estimated scheduled pass. on boardScheduled seats

Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC LOAD FACTOR PERFORMANCE SARDINIA - ROME FCO / MILAN LIN • Most routes show an average load factor decrease in the first year of the 2nd PSOs 12-month average of th e average monthl y loa d fac tors: May 05 - April 06 May 06 - April 07

Cagliari-Rome FCO 80.50% 67.86%

Olbia-Rome FCO 76. 10% 74. 83%

Alghero-Rome FCO 56.31% 63.96%

Cagliari-Milan LIN 72.87% 71.44%

Olbia-Milan LIN 79.31% 75.80%

Alghero-Milan LIN 69.56% 60.57%

Average domestic 64. 10% 64. 30% North-South routes Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC LOAD FACTOR SEASONALITY SARDINIA - ROME FCO / MILAN LIN • The 2nd PSOs contributed to de-seasonalise the average monthly load factors throughout the year standard deviations (σ) of the average monthly load factors: May 05 - April 06 May 06 - April 07

Cagliari-Rome FCO 9.79% 5.32%

Olbia-Rome FCO 7.21% 6.67%

Alghero-Rome FCO 8.41% 10.33%

Cagliari-Milan LIN 5.43% 5.78%

Olbia-Milan LIN 8.20% 6.30%

Alghero-Milan LIN 8.09% 5.83%

Average domestic 4.92% 4.79% North-South routes Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC LOAD FACTOR PERFORMANCE CAGLIARI - ROME FCO 1999-2007 • The 2nd PSOs contributed on most of the routes to the decrease and to the de-seasonalisa tion ofthf the average mon thly loa dfd fac tors troug hou ttht the year

CAGLIARI-ROME FIUMICINO LOAD FACTORS vs. ITALIAN NORTH-SOUTH ROUTES 100%

90%

80% d flights)

ee 70%

60%

r (schedul 50% ▲2nd PSOs sta start rt

40%

30% . load facto load .

20%

% pass 10%

0% Jul-06 Jul-05 Jul-04 Jul-03 Jul-02 Jul-01 Jul-00 Jul-99 Apr-07 Apr-06 Apr-05 Apr-04 Apr-03 Apr-02 Apr-01 Apr-00 Apr-99 Jan-07 Jan-06 Jan-05 Jan-04 Jan-03 Jan-02 Jan-01 Jan-00 Jan-99 Oct-06 Oct-05 Oct-04 Oct-03 Oct-02 Oct-01 Oct-00 Oct-99 Cagliari-Rome FCO Average domestic Italian North-South routes

Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC PSOs EFFECT ON SARDINIAN ROUTES

• Schedu led t ra ffic, capac ity a nd load facto r an al ysi s of th e Sar dini an P SOs routes and of 69 Italian domestic North-South routes

• Fares recording of 220 round trip combinations to/from Sardinia from March to July 2008

• Air Connectivity Analysis of Sardinia - role of the mainland Italy PSOs destinations as connecting points for reaching further destinations FARES ANALYSIS

• Fares were recorded for the 16 PSOs routes + the 10 following “free market” routes: ¾ Cagliari - Milan Malpensa / Milan Orio al Serio / Pisa / ¾ Olbia - Milan Malpensa / Milan Orio al Serio / Venice ¾ Alghero - Milan Malpensa / Milan Orio al Serio / Pisa

• Fares were recorded for 220 round-trip flight combinations: ¾ 110 Tue-Wed round trips starting in Sardinia on 10/6 and 8/7/08 (55 each) ¾ 110 Fri-Sun round trips starting in mainland Italy on 13/6 and 11/7/08 (55 each)

• The recorded fares were the lowest internet fares (incl.taxes) on sale for everyone (“non-resident fares” for PSOs routes)

• “Peak time” and “off peak time” recordings carried out where possible

• Fares were accessed each two week s f rom M arch t o J ul y 2008 , da ily in the las t wee k THE ISSUES EMERGING FROM THE FARES ANALYSIS CONCERN:

Flight s accessibilit y / avail abilit y

Fares range

Fares level

Average fares level FLIGHTS ACCESSIBILITY / AVAILABILITY ISSUE • PSOs flights get easily full in Summer, notwithstanding the PSOs frequency / capacity requirements

• PSOs flights get full easier than the Sardinia “free market ” routes: stronger demand on PSOs routes

• Without the PSOs frequency / capacity requirements the availability issue would be greater, especially on the Milan LIN routes (because of slot / regulatory constraints)

• Weekend 11-13 July 08: ¾ 19. 01% of the recorded flights got full 1 week before departure ¾ 37.19% of the recorded flights got full 1 day before departure ¾ Olb i a fli ght s w er e f ull in 1 9.77 % of th e t ot al f ar e r ecor din g att em pt s (86 out of 435), against the 13.08% for Cagliari and the 10.54% for Alghero FARES RANGE / FARES LEVEL ISSUES • The “free market” flights show greater fare increases from the first to the last recording than the PSOs services (where a fare cap was in place) = fares on PSOs flights are more stable

• Weekend 11-13 July 08: fares increased by >50 € in 34 cases, 30 of which related to “free market” routes airline ▼ route ▼ fare range final fare MyAir Venice - Cagliari + 250 € 335.62 € easyJet Milan Malpensa - Olbia + 163 € 243.99 € Meridiana Olbia - Venice + 147 € 256.78 € Ryanair Pisa - Alghero + 143 € 185.97 €

• On PSOs services, the lowest “non residents” fares were often close or coincided with the maximum allowed “non concessionary fares”

• Free market flights are cheaper than PSOs flights if booked in advance (but not much cheaper for Sardinian residents and the other eligible passengers)…

• …BUT could become much more expensive than PSOs flights if booked with short notice (especially for the “eligible passengers” )

• If PSOs were lifted, unplanned trips would become more expensive (Sardinian residents particularly affected) MILAN LINATE - OLBIA and return 11-13 JULY 2008 (Fri-Sun) 350 OLB-LIN: non subsidized PSOs route

300

250 r) uu

Fares (E 200

150

100 28.03 11.04 25.04 9.05 23.05 6.06 20.06 4.07 5.07 6.07 7.07 8.07 9.07 10.07 Recording date (dd.mm)

MERIDIANA lowest "non residents" fare/peak times MERIDIANA lowest "non residents" fare/off peak times Max "non residents" fare (always available) Max "residents" fare (always available) MILAN MXP / MILAN BGY - OLBIA and return 11-13 JULY 2008 (Fri-Sun) 700 OLB-MXP/BGY: liberalized routes 650

600

550

500

)) 450

400

Fares (Eur Fares 350

300

250

200

150

100 28.03 11.04 25.04 9.05 23.05 6.06 20.06 4.07 5.07 6.07 7.07 8.07 9.07 10.07 Recording date (dd.mm) MERIDIANA- (MXP) lowest fare/peak times MERIDIANA-EUROFLY (MXP) lowest fare/off peak times EASYJET (MXP) peak times EASYJET (MXP) off peak times VOLAREWEB (MXP) lowest fare MYAIR (BGY) lowest fare Max PSOs "non residents" fare for LIN-OLB-LIN Max PSOs "residents fare" for LIN-OLB-LIN FLORENCE - CAGLIARI, PISA - CAGLIARI and return 13-15 JUNE 2008 (Fri-Sun) 350 CAG-FLR: subsidized PSOs route CAG-PSA: liberalized liberalized route route 300

250

r) 200 uu

150 Fares (E

100

50

0 21.03 4.04 18.04 2.05 16.05 30.05 6.06 7.06 8.06 9.06 10.06 11.06 12.06 Recording date (dd.mm) MERIDIANA (FLR) oweslt " t non" res id idents" t f "are f/pea /k t. k t MERIDIANA (FLR) owesl t " t non" res id idents" t f "are f/off / pea ff k t. k t RYANAIR (PSA) Max PSOs "non residents" fare for FLR-CAG-FLR Max PSOs "residents fare" for FLR-CAG-FLR AVERAGE FARES LEVEL ISSUE are Sardinian PSOs flights on average cheaper than the Italian domestic flights? • Average domestic Italian fare in 2006: 133 € one-way incl.taxes (Assaeroporti) • Average Sardinian PSOs fare in 2007: 109 € one-way incl.taxes (Reg. Sardegna)

• In 2007 Air One Sardinian av. fares were < Air One av. domestic fares (Air One 2008) if PSOs fares requirements were lifted… • “Full service carriers” like Air One are likely to increase their average Sardinian fares

• In Summer, fares would rise because of the strong tourist demand (especially in Olbia)

• In Winter, fares are likely to increase in Olbia and Alghero because:

¾ the Winter traffic is low

¾ most of traffic is compelled to travel

¾ the price-inelastic pppygart of it would pay high fares

¾ the price-elastic part of it would use the ferries

¾ the Italian tourist demand could hardly be stimulated by low fares in Winter AVERAGE FARES LEVEL ISSUE …if PSOs go, could “low cost airlines” mitigate the expected average fares increase? • The ent ry pot enti al of “l ow cost ai rli nes ” on to day ’s PSOs rou tes i s low: ¾ Milan Linate: slot and legal constraints ¾ Rome Fiumicino: slot constrained at peak times • Best “low cost” entry potential for the Cagliari-Fiumicino route

• “Full service airlines” are unlikely to reduce on Sardinia (they need connecting traffic) • Passengers need the schedule flexibility of “full service airlines ” (and the connections!)

• The “low cost” average fare could hardly be lower than the current PSOs average (unless flight frequencies are reduced) • Author’s estimate of the 2007 Alghero-Rome FCO average fare: 68 € one-way excl.tax • easyJet’s average fare in 2007: ca. 58€ (43£) one-way excl. tax • …But easyJet’s average load factor in 2007 was 83.7%... • …Sardinian routes allow lower load factors, especially in Winter - unless frequencies ↓ • Ryanair would probably make it, excluding the extra-fees! PSOs EFFECT ON SARDINIAN ROUTES

• Schedu led t ra ffic, capac ity a nd load facto r an al ysi s of th e Sar dini an P SOs routes and of 69 Italian domestic North-South routes

• Fares recording of 220 round trip combinations to/from Sardinia from March to July 2008

• Air Connectivity Analysis of Sardinia - role of the mainland Italy PSOs destinations as connecting points for reaching further destinations AIR CONNECTIVITY ANALYSIS OF SARDINIA Shortest Path Length Connectivity Index (SPL CI) of a given airport: • “Average number of the necessary steps for a passenger in order to reach any other airport of the network, departing from the airport in question (ICCSAI)” • SPL CI = 1 when the airport has non-stop services with all the airports of the network

Italian,,p European and extra-Europpg,,gean SPL CIs of Cagliari, Olbia, Alghero: • Based on all possible one-stop (or multi-stop) itineraries starting in each airport and ending in an Italian, European and extra-European destination (100 in total) • Europ./extra-Europ. CIs : each based on the 30 most demanded destinations (MIDT)

Betweenness Index (BI): • “No. of shortest path one-stop itineraries via a given connecting airport” • calculated for all the connecting points analysed in the SPL Connectivity Analysis • % BI: BI as % of the total one-stop itineraries available • % IATA BI: only considers the itineraries involving an IATA member airline for at least the journey leg to and from Sardinia • % IATA BI: takes into account the real connecting opportunities for passengers SARDINIA’S AIRPORTS SPL CONNECTIVITY INDEXES • Cagliari: the most homogeneous • Olbia: the most seasonal (with a 1 .941 domestic CI in Feb 08) • Alghero: the poorest European and extra-European CIs

CAGLIARI OLBIA ALGHERO Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08 DOMESTIC SPL CIs Real scenario 1.618 1.676 1.324 1.941 1.647 1.853 Low cost scenario 1.735 1.794 1.382 2.029 1.824 2.029 EUROPEAN SPL CIs Real scenario 1.706 1.824 1.412 1.853 2.000 1.971 Low cost scenario 1.706 1.853 1.412 1.882 2.000 2.000 extra-EUROPEAN CIs Real scenario 2.033 2.067 2.033 2.067 2.133 2.100 Low cost scenario 2.033 2.067 2.033 2.067 2.133 2.100

• “Low cost Scenario”: PSOs services to Rome FCO, Milan LIN, Bologna and Florence replaced by “low cost” services to Rome Ciampino, Milan Malpensa/Orio, Forlì and Pisa respectively

• Low cost scenarios have a negative impact especially on the domestic Indexes: PSOs destinations (especially Rome FCO) are important for Sardinia’s connectivity BETWEENNESS OF THE PSOs DESTINATIONS IN MAINLAND ITALY • The % IATA BI of mainland Italy PSOs destinations are higher in the off-peak season

• Cagliari: PSOs destinations are important connecting points esp. for domestic itineraries

• Olbia: PSOs destinations are very important connecting points in the off-peak season

• Alghero : PSOs destinations are very important connecting points both in the peak and in the off-peak season (entirely dependent on PSOs destinations for the IATA two-step it inerar ies in Fe b 2008) DOMESTIC ITINERARIES Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08 Total betweenness 51 39 23 36 42 44 mainland Italy % betweenness 40.48% 45.88% 24.21% 34.29% 35.29% 39.29% PSOs airports % IATA betweenness 54. 84% 76.47% 35.94% 65.45% 79.25% 100.00% EUROPEAN ITINERARIES Total betweenness 81 86 22 54 64 66 mailinland dItl Italy % betweenness 21.20% 28.86% 6.47% 22.41% 22.86% 34.38% PSOs airports % IATA betweenness 33.89% 55.13% 13.84% 84.38% 63.37% 100.00% EXTRA-EUROPEAN ITINERARIES Total betweenness 31 21 25 19 25 19 mainland Italy % betweenness 15.35% 15.22% 7.65% 19.39% 27.78% 25.33% PSOs airports % IATA betweenness 22.46% 30.88% 13.44% 95.00% 80.65% 100.00% BETWEENNESS OF THE PSOs DESTINATIONS IN MAINLAND ITALY • Rome FCO leading PSOs connecting airport - particularly on long-haul and domestic

• …Milan LIN ranks 2nd, Bologna 3rd

• FCO unique connection point for 3 European itineraries and 13 domestic itineraries…

• …10 of these 13 itineraries originate in Olbia and Alghero (9 are in Winter)

• Northern Sardinian airppports more dependent on PSOs destinations for their connectivity than Cagliari

• Bologna and Turin (subsidised from Alghero!) are the most relevant connecting points among the “regional” PSOs destinations

• Florence important European hub

Among the non-PSOs destinations…

• Milan Orio al Serio important for European connectivity

• Milan Malpensa important for long haul connectivity

•…BtBut no IATA servi ces t o O Oirio and dMl MalpensaCi amp ino p lays a marg ina l ro le as connecting point CONCLUSIONS TODAY WE HAVE SEEN… • What is meant by “Air Transport Public Service Obligations”

• How PSOs are implemented on several routes between Sardinia and mainland Italy

• The effect of PSOs on these routes and what could change if PSOs were lifted

IF SARDINIAN PSOs WERE LIFTED… • The passengers breakdown would change (▼Sardinians, ▲tourists?)… • …But traffic would not automatically increase, traffic seasonality unchanged • Higher load factors in Summer, lower in Winter… • …Fewer Winter flights to Olbia and Alghero, possibly in the middle of the day • Flights would get full more easily in Summer • No fare certainty (high fare ranges), likely increase of the average fares • In Summer, tickets cheaper for early bookings, more expensive for late bookings • In Winter, fares more exppgensive from Olbia/Alghero due to low, inelastic demand • Fewer IATA flights (especially to Rome Fiumicino) = worsened “real life” air transport connectivity SOME REFERENCES Di Francesco, A (2008), “The Potential Impact of Removing Public Service Obligation Regulations on the Air Transport Market between Sardinia and the Italian Mainland” MSc Thesis , School of Engineering, Department of Air Transport, Cranfield University UK – soon available on line (https://dspace.lib.cranfield.ac.uk/)

• European Commission (2008), “Council Regulation (EEC) No 1008/2008 of 24 September 2008 on common rules for the operation of air services in the Community”, Official Journal of the European Union, L 293, 31.10.2008, p.3 • ICCSAI - International Center for Competitiveness Studies in Aviation Industry (2008), “Factbook 2008 , Air Transport in Eu rope”, ICCSAI, Bergamo (2008) • Regione Autonoma della Sardegna, Assessorato ai Trasporti (2007), Piano Regionale dei Trasporti, available at: www.regione.sardegna.it/speciali/pianotrasporti • Pagliari, R., Williams, G. (2004), “A comparative analysis of the application and use of public service obligations in air transport within the EU”, Journal of Air Transport Management, 11 (2004), p. 55-65 • Deiana, M. (2001), “Gli oneri di servizio pubblico nel trasporto aereo”, in: Dir. trasp. 2-3/2001, ed. ISDIT, Cagliari, p. 423 ss. Questions? APPENDIX SCHEDULED PASSENGERS PERFORMANCE 2003-2007 SARDINIA - FCO / LIN

May 03 - May 04 - May 05 - May 06 - Apr 04 Apr 05 Apr 06 Apr 07 pass. 934,194 912,456 929,183 871,583 Cagliari-Rome FCO % ∆∆ passpass 199%1.99% -2.33% 1.83% -6.20%

pass. 412,846 388,228 362,793 350,027 Olbia-Rome FCO % ∆ pass 3.28% -5.96% -6.55% -3.52%

pass. 263,619 272,760 Alghero-Rome FCO % ∆ pass -12.99% 3.47%

pass. 315,375 329,242 573,997 605,480 Cagliari-Milan LIN % ∆ pass 12.44% 4.40% 74.34% 5.48%

pass. 250,695 695 261,020 020 286,131 131 318,624 624 Olbia-Milan LIN % ∆ pass 19.70% 4.12% 9.62% 11.36%

pass. 155,741 218,874 Algh hero-Mil Milan LIN LIN % ∆ pass 10.31% 40.54% Average domestic % ∆∆ passpass 6.63% 1.95% 4.25% 7.25% Italian Traffic seasonality: standard deviations 99-07 of the est. monthly scheduled passengers

May 99 - May 02 - May 03 - May 04 - May 05 - May 06 - Apr 00 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Cagliari-Rome FCO monthly passengers 7,991.83 9,773.42 9,890.67 7,781.52 8,915.15 9,770.51 standard deviation (σ) σ as % of the average 10. 25% 12. 80% 12. 70% 10. 23% 11. 51% 13. 45% monthly passengers

Olbia-Rome FCO monthly passengers 9,887.61 9,732.52 8,540.00 9,908.07 6,985.85 6,737.02 standard deviation (σ) σ as % of the average 36.19% 29.22% 24.82% 30.63% 23.11% 23.10% monthly passengers Alghero-Rome FCO monthly passengers 3,155.81 2,898.73 3,788.62 3,152.53 standard deviation (σ) σ as % of the average 13.30% 11.48% 17.25% 13.87% monthly passengers Cagliari-Milan LIN monthly passengers 2,613.43 5,164.64 2,135.17 6,030.83 5,206.93 10,769.26 standard deviation (σ) σ as % of the average 18.01% 22.10% 8.12% 21.98% 10.89% 21.34% monthly passengers Olbia-Milan LIN monthly passengers 3,072.33 3,992.94 7,864.19 7,385.33 11,333.67 standard deviation (σ) σ as % of the average 16.14% 19.11% 36.15% 30.97% 42.68% monthly passengers Alg hero- Milan LIN monthly passengers 1,660.74 1,842.34 2,452.38 standard deviation (σ) σ as % of the average 14.12% 14.20% 13.45% monthly passengers SCHEDULED PASSENGERS PERFORMANCE ALGHERO - ROME FCO 1999-2007

-12. 99% passengers decline in the first year of Ryanair operations on Alghero-Rome Ciampino (May 2005-May 2006) + 3.47 % pass. Increase in the first year of the new PSOs (272,760 pass.)

ALGHERO-ROME FIUMICINO SCHEDULED PASSENGERS / SEATS 60,000 ▼ RYANAIR ▼ 55,000 50,000 45,000

s./seats 40,000 ss 35,000 30,000

heduled pa 25,000 cc s 20,000

15,000 ▲2nd PSOs sta rt 10,000 Jul-06 Jul-05 Jul-04 Jul-03 Jul-02 Jul-01 Jul-00 Jul-99 Apr-07 Apr-06 Apr-05 Apr-04 Apr-03 Apr-02 Apr-01 Apr-00 Apr-99 Jan-07 Jan-06 Jan-05 Jan-04 Jan-03 Jan-02 Jan-01 Jan-00 Jan-99 Oct-06 Oct-05 Oct-04 Oct-03 Oct-02 Oct-01 Oct-00 Oct-99 Tot. estimated scheduled pass. on board Scheduled seats

Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC LOAD FACTOR PERFORMANCE / SEASONALITY 1999-2007 SARDINIA - FCO/LIN Average % scheduled passenger load factors Mayy99 99 - Mayy0 02 - Mayy03 03 - Mayy0 04 - Mayy05 05 - Mayy06 06 - Apr 00 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Cagliari-Rome FCO 67.97% 84.57% 82.73% 84.16% 80.50% 67.86% Olbia- Rome FCO 71. 32% 74. 14% 76. 92% 77. 46% 76. 10% 74. 83% Alghero-Rome FCO 75.47% 60.50% 56.31% 63.96% Cagliari-Milan LIN 62.80% 83.74% 87.51% 78.44% 72.87% 71.44% Olbia-Milan LIN 70. 37% 71. 68% 72. 87% 79. 31% 75. 80% Alghero-Milan LIN 61.41% 69.56% 60.57% Average domestic Italian 62.07% 60.61% 63.49% 61.76% 64.10% 64.30% North-South routes

Load factors standard deviation May 99 - May 02 - May 03 - May 04 - May 05 - May 06 - Apr 00 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Cagliari-Rome FCO 8.72% 5.36% 6.40% 9.46% 9.79% 5.32% Olbia-Rome FCO 9.58% 5.40% 7.52% 4.93% 7.21% 6.67% Alghero-Rome FCO 7.17% 6.73% 8.41% 10.33% Cagliari-Milan LIN 9.46% 6.62% 5.33% 9.52% 5.43% 5.78% Olbia-Milan LIN 8.73% 7.91% 6.95% 8.20% 6.30% Alghero-Milan LIN 7.30% 8.09% 5.83% Average domestic Italian 6.22% 5.38% 3.86% 5.07% 4.92% 4.79% North-South routes VERONA/VENICE-CAGLIARI and return 11-13 JULY 2008 (Fri-Sun) 450 CAG-VRN: non subsidized PSOs route CAG-VCE: liberalized PSOs route 400

350

r) 300 uu

250 Fares (E

200

150

100 28.03 11.04 25.04 9.05 23.05 6.06 20.06 4.07 5.07 6.07 7.07 8.07 9.07 10.07 Recording date (dd.mm) MERIDIANA (VRN) lowest "non residents" fare/peak t. MERIDIANA (VRN) lowest "non residents" fare/off peak t. MERIDIANA (VCE) lowest fare ALITALIA (VCE) lowest fare MYAIR (VCE) lowest fare Max PSOs "non residents" fare for VRN-CAG-VRN Max PSOs "residents" fare for VRN-CAG-VRN OLBIA MILAN MXP / MILAN BGY and return 8-9 JULY 2008 (Tue-Wed) 450 OLB-MXP/BGY: liberalized routes

400

350

300 ) rr 250

200 Fares (Eu

150

100

50

0 1.04 15.04 29.04 13.05 27.05 10.06 24.06 1.07 2.07 3.07 4.07 5.07 6.07 7.07 Recording date (dd.mm) VOLAREWEB (MXP) lowest fare 8-10 July EASYJET (MXP) peak times EASYJET (MXP) off peak times MYAIR (BGY), lowest fare 7-9 July Max PSOs "non residents" fare for OLB-LIN-OLB Max PSOs "residents fare" for OLB-LIN-OLB OLBIA-MILAN LINATE and return 8-9 JULY 2008 (Tue-Wed) 350 OLB-LIN: non subsidized PSOs route

300

250 ) rr 200

150 Fares (Eu

100

50

0 1.04 15.04 29.04 13.05 27.05 10.06 24.06 1.07 2.07 3.07 4.07 5.07 6.07 7.07 Recording date (dd.mm)

MERIDIANA lowest "non residents" fare/peak times MERIDIANA lowest "non residents" fare/off peak times Max "non residents" fare (always available) Max "residents fare" (always available) MILAN LIN / MXP /BGY - ALGHERO and return 11-13 JULY 2008 (Fri-Sun)

AHO- LIN: non subsidized PSOs route AHO- MXP/BGY: liberalized routes

400

350

300

250 (Eur)

ss 200

Fare 150

100

50

0 28.03 11.04 25.04 9.05 23.05 6.06 20.06 4.07 5.07 6.07 7.07 8.07 9.07 10.07 Recording date (dd.mm) AIR ONE (LIN) lowest "non residents" fare/peak t. AIR ONE (LIN) lowest "non residents" fare/off peak t. RYANAIR (BGY) VOLAREWEB (MXP) lowest fare Max PSOs "non residents" fare for LIN-AHO-LIN Max PSOs "residents" fare for LIN-AHO-LIN Domestic Betweenness of the PSOs destinations Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 16 12 8 20 18 19 Rome FCO % betweenness 12.70% 14.12% 8.42% 19.05% 15.13% 16.96% % IATA betweenness 17.20% 23.53% 12.50% 36.36% 33.96% 43.18%

betweenness 10 6 8 8 11 9 Milan LIN %b% be tweenness 7. 94% 7. 06% 8. 42% 7. 62% 9. 24% 8. 04% % IATA betweenness 10.75% 11.76% 12.50% 14.55% 20.75% 20.45%

betweenness 5548 68 Bologna BLQ % betweenness 3.97% 5.88% 4.21% 7.62% 5.04% 7.14% % IATA betweenness 5. 38% 9. 80% 625%6.25% 14. 55% 11. 32% 18. 18%

betweenness 6 5 7 8 Turin TRN % betweenness 4.76% 5.88% 5.88% 7.14% % IATA betweenness 6.45% 9.80% 13.21% 18.18%

betweenness 4 3 3 Verona VRN % betweenness 3.17% 3.53% 3.16% % IATA betweenness 4.30% 5.88% 4.69%

betweenness 1 1 Florence FLR %b% be tweenness 0. 79% 1. 18% % IATA betweenness 1.08% 1.96%

betweenness 3 3 Naples NAP % betweenness 2.38% 3.53% % IATA betweenness 3. 23% 5. 88%

betweenness 6 4 Palermo PMO % betweenness 4.76% 4.71% % IATA betweenness 6.45% 7.84%

betweenness 51 39 23 36 42 44 Total PSOs airports % betweenness 40.48% 45.88% 24.21% 34.29% 35.29% 39.29% % IATA betweenness 54.84% 76.47% 35.94% 65.45% 79.25% 100.00%

Source: Author, compiled from data provided from OAG, 2008 European Betweenness of the PSOs destinations

Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 23 27 13 28 30 31 Rome FCO % betweenness 6.02% 9.06% 3.82% 11.62% 10.71% 16.15% % IATA betweenness 9.62% 17.31% 8.18% 43.75% 29.70% 46.97%

betweenness 10 12 5 14 12 13 Milan LIN % betweenness 2.62% 4.03% 1.47% 5.81% 4.29% 6.77% % IATA betweenness 4.18% 7.69% 3.14% 21.88% 11.88% 19.70%

betweenness 11 10 3 12 14 14 Bologna BLQ % betweenness 2.88% 3.36% 0.88% 4.98% 5.00% 7.29% %IATAb% IATA be tweenness 4. 60% 641%6.41% 189%1.89% 18. 75% 13. 86% 21. 21%

betweenness 3 5 8 8 Turin TRN % betweenness 0.79% 1.68% 2.86% 4.17% % IATA betweenness 1.26% 3.21% 7.92% 12.12%

betweenness 5 7 1 Verona VRN % betweenness 1.31% 2.35% 0.29% % IATA betweenness 2.09% 4.49% 0.63%

betweenness 10 9 Florence FLR % betweenness 2.62% 3.02% % IATA betweenness 4.18% 5.77%

betweenness 14 12 Naples NAP % betweenness 3.66% 4.03% %IATAb% IATA be tweenness 5. 86% 769%7.69%

betweenness 5 4 Palermo PMO % betweenness 1.31% 1.34% % IATA betweenness 2.09% 2.56%

betweenness 81 86 22 54 64 66 Total PSOs airports % betweenness 21.20% 28.86% 6.47% 22.41% 22.86% 34.38% % IATA betweenness 33.89% 55.13% 13.84% 84.38% 63.37% 100.00%

Source: Author, compiled from data provided from OAG, 2008 extra-European Betweenness of the PSOs destinations Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 22 17 21 17 21 16 Rome FCO % betweenness 10.89% 12.32% 6.42% 17.35% 23.33% 21.33% % IATA betweenness 15.94% 25.00% 11.29% 85.00% 67.74% 84.21%

betweenness 0 0 0 0 0 Milan LIN %b% be tweenness 0. 00% 000%0.00% 000%0.00% 000%0.00% 000%0.00% % IATA betweenness 0.00% 0.00% 0.00% 0.00% 0.00%

betweenness 3 2 3 2 3 2 Bologna BLQ % betweenness 1.49% 1.45% 0.92% 2.04% 3.33% 2.67% % IATA betweenness 217%2.17% 2. 94% 161%1.61% 10. 00% 9. 68% 10. 53%

betweenness 1 1 1 1 Turin TRN % betweenness 0.50% 0.72% 1.11% 1.33% % IATA betweenness 0.72% 1.47% 3.23% 5.26%

betweenness 1 1 1 0 Verona VRN % betweenness 0.50% 0.72% 0.31% 0.00% % IATA betweenness 0.72% 1.47% 0.54% 0.00%

betweenness 0 0 Florence FLR %b% be tweenness 0. 00% 000%0.00% % IATA betweenness 0.00% 0.00%

betweenness 2 0 Naples NAP % betweenness 0.99% 0.00% % IATA betweenness 145%1.45% 0. 00%

betweenness 2 0 Palermo PMO % betweenness 0.99% 0.00% % IATA betweenness 1.45% 0.00%

betweenness 31 21 25 19 25 19 Total PSOs airports % betweenness 15.35% 15.22% 7.65% 19.39% 27.78% 25.33% % IATA betweenness 22.46% 30.88% 13.44% 95.00% 80.65% 100.00%

Source: Author, compiled from data provided from OAG, 2008 "LOW COST SCENARIO" Betweenness of Rome Ciampino and Forlì airports

“Low cost scenario”: theoretical scenario under which the flights from Sardinia to Rome Fiumicino, Milan Linate and Bologna are replaced by “low cost ” services to Rome Ciampino, Milan Malpensa/Orio al Serio and Forlì

DOMESTIC BETWEENNESS Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼Connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 1 1 1 1 already Rome CIA % betweenness 0.75% 1.03% 0.72% 1.08% operated

betweenness 1 1 1 1 2 FlìFRLForlì FRL % betweenness 0.75% 1.03% 0.72% 1.08% 2.02%

EUROPEAN BETWEENNESS Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 2 3 2 4already 2 Rome CIA % betweenness 0.60% 1.21% 0.62% 1.97%operated 1.45%

betweenness 3 4 3 3 2 2 Forlì FRL % betweenness 0.90% 1.62% 0.93% 1.48% 0.88% 1.45%

EXTRA-EUROPEAN BETWEENNESS Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 0 0 0 0 0 0 Rome CIA % betweenness 0. 00% 0. 00% 000%0.00% 0. 00% 0. 00% 0. 00%

betweenness 0 0 0 0 0 0 Forlì FRL % betweenness 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Source: Author, compiled from data provided from OAG, 2008 ESSENTIAL BETWEENNESS OF THE PSOs DESTINATIONS

Essential betweenness: no. of shortest path one-stop itineraries for which a given airport is the unique connection point

DOMESTIC ITINERARIES Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

essential betweenness 1 2 4 1 5 Rome FCO % essential betwenness 0.79% 2.35% 3.81% 0.84% 4.46%

essential betweenness 1 Palermo PMO % essential betwenness 1. 18%

EUROPEAN ITINERARIES Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connec ting a irpor t A08Aug 08 Fb08Feb 08 A08Aug 08 Fb08Feb 08 A08Aug 08 Fb08Feb 08

essential betweenness 1 1 1 Rome FCO % essential betwenness 0.34% 0.41% 0.52%

EXTRA EUROPEAN ITINERARIES: no PSO airport is a unique connection point

Rome Fiumicino: unique connection point for 13 itineraries DOMESTIC ITINERARIES Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO Betweenness of Milan Malpensa/Orio al Serio,PisaandRome Betweenness Malpensa/Orio Ciampino (realscenario) of Milan ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 88 3 12 813 Milan MXP % betweenness 6.35% 9.41% 3.16% 11.43% 6.72% 11.61% % IATA betweenness 8.60% - 4.69% - --

betweenness 76 6 79 Milan BGY % betweenness 5.56% 7.06% 6.32% 5.88% 8.04% % IATA betweenness 7.53% - 9.38%

betweenness 31 3 54 Pisa PSA % betweenness 2.38% 1.18% 3.16% 4.20% 3.57% % IATA betweenness --4.69% --

betweenness 1 Rome CIA % betweenness 0.84% % IATA betweenness EUROPEAN ITINERARIES Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 21 25 12 26 28 29 Milan MXP % betweenness 5.50% 8.39% 3.53% 10.79% 10.00% 15.10% % IATA betweenness 8.79% - 7.55% - --

betweenness 68 2 68 Milan BGY % betweenness 1.57% 2.68% 0.59% 2.14% 4.17% % IATA betweenness 2.51% - 1.26% - -

betweenness 53 1 97 Pisa PSA % betweenness 1.31% 1.01% 0.29% 3.21% 3.65% % IATA betweenness --0.63% --

betweenness 3 Rome CIA % betweenness 1.07% % IATA betweenness - EXTRA EUROPEAN ITINERARIES Final destination / dep. airport ► CAGLIARI OLBIA ALGHERO ▼PSOs connecting airport Aug 08 Feb 08 Aug 08 Feb 08 Aug 08 Feb 08

betweenness 18 23 18 23 18 23 Milan MXP % betweenness 8.91% 16.67% 5.50% 23.47% 20.00% 30.67% % IATA betweenness 13.04% - 9.68% - --

betweenness 22 2 22 Milan BGY % betweenness 0.99% 1.45% 0.61% 2.22% 2.67% % IATA betweenness 1.45% - 1.08% --

betweenness 21 2 21 Pisa PSA % betweenness 0.99% 0.72% 0.61% 2.22% 1.33% % IATA betweenness --1.08% --

betweenness 0 Rome CIA % betweenness 0.00% % IATA betweenness 0.00% Source: Author, compiled from data provided from OAG, 2008 Example of detailed “Betweenness” table (1 out of 18) - Betweenness of the connection airports for the domestic one-stop trips originating in Cagliari - August 2008

Connection airport Aug 08 o.w. Airline(s) (No of operations) No of itineraries %Betweenness No of itineraries IATA "LOW COST SCENARIO" (PSOs airports flights from (non IATA airlines in italics) via the of the via the %Betweenness No of itineraries %Betweenness highlighted) CAG to the connection connection connection of the via the of the connnect. apt. airport airport airport connection connection connection airport airport airport Rome FCO 369 Meridiana (245), Air One (124) 16 12.70% 16 17.20% Milan LIN 222 Meridiana (119), Air One (103) 10 7.94% 10 10.75% Volareweb (52), Easyjet (31), Meridiana Milan MXP 93 8 8 9 6.77% (10) 6.35% 8.60% Milan BGY 58 Ryanair (31), MyAir (23), Meridiana (4) 7 5.56% 7 7.53% 7 5.26% Girona GRO 13 Ryanair 6 4.76% 0.00% 4 3.01% Munich MUC 23 Tuifly (13) , (10) 6 4.76% 6 645%6.45% 9 6.77% Palermo PMO 31 Meridiana 6 4.76% 6 6.45% 9 6.77% Bologna BLQ 61 Meridiana 5 3.97% 5 5.38% Paris CDG 27 Meridiana 5 3.97% 5 5.38% 9 6.77% Turin TRN 55 Meridiana 6 4.76% 6 6.45% 8 6.02% Venice VCE 88 Alitalia (31), MyAir (30), Meridiana (27) 5 3.97% 5 5.38% 6 4.51% Brussels BRU 27 Brussels Airlines 4 3.17% 4 4.30% 8 6.02% Cologne/Bonn CGN 14 Tuifly 4 3.17% 6 4.51% Luxemburg LUX 5 Luxair 4 3.17% 4 4.30% 6 4.51% Stuttgart STR 13 Tuifly 4 3.17% 6 4.51% Madrid MAD 18 Ryanair 4 3.17% 7 5.26% Verona VRN 67 Meridiana 4 3.17% 4 4.30% 5 3.76% Basel BSL 9 Easyjet 3 2.38% 2 1.50% Geneva GVA 9 Easyjet 3 2.38% 4 3.01% London LGW 14 British Airways 3 2.38% 3 3.23% 6 4.51% Naples NAP 76 Meridiana 3 2.38% 3 3.23% 6 4.51% Pisa PSA 31 Ryanair 3 2.38% 4 3.01% Zürich ZRH 5 Edelweiss 3 2.38% 5 3.76% Genoa GOA 31 Air Vallee 2 1.59% 3 2.26% Oslo OSL 5 SAS 2 1.50% Florence FLR 93 Meridiana 1 0.79% 1 1.08% London LTN 31 Easyjet 1 0.79% Rome CIA 1 0.75% Forlì FRL 1 0.75% 126 (92 IATA, Total 1488 93 133 33 non IATA) Cumulated %Betweenness of PSOs airports: 40.48% 54.84% Source: Author, compiled from data provided from OAG, 2008 Sample of connectivity tables (4 out of 36) - Cagliari airport domestic connectivity-August 08

Destination PWEW 06-07 06-07 SPL One way way flights flights Aug Aug.08 08 Airline(s) (No (No of of operations) operations) Milan LIN 8,308.0 1 222 Meridiana (119), Air One (103) ● Domestic SPL Connectivity Index August 2008: 1.618 Rome FCO 8,300.9 1 369 Meridiana (245), Air One (124) ● Average no. of possible intermediate stops available: 6.00 Venice VCE 1,066.0 1 88 Alitalia (31), MyAir (30), Meridiana (27) ● Total no. of avail. itineraries with intermediate stop Bologna BLQ 959.3 1 61 Meridiana (total no. of intermediate stops available): 126 Turin TRN 820.3 1 55 Meridiana

Verona VRN 740.7 1 67 Meridiana Naples NAP 543.3 1 76 Meridiana PWEW: average Passengers per Week Each Way (MIDT) Florence FLR 333.1 1 93 Meridiana SPL: Shortest Path Length (min. no. of steps) Palermo PMO 243.4 1 31 Meridiana Genoa GOA 235.3 1 31 Air Vallee Milan BGY 151.0 1 58 Ryanair (31), MyAir (23), Meridiana (4) Pisa PSA 121.9 1 31 Ryanair Milan MXP 10.9 1 93 Volareweb (52), Easyjet (31), Meridiana (10) ▼Possible stops (PSOs destinations highlighted) No. of possible stops ▼ Catania CTA 227.3 2BGY BLQ BRU CDG CGN FCO FLR GOA GVA LGW LIN LUX MAD MUC MXP NAP PSA STR TRN VCE VRN ZRH 22 Bari BRI 215.7 2BGY BLQ BRU BSL CDG CGN FCO GOA LGW LIN LUX MAD MUC MXP STR TRN VCE VRN 18 Lamezia Terme SUF 68.3 2 BGY BLQ BRU BSL CGN FCO LIN LUX MUC MXP PSA STR TRN VCE VRN ZRH 16 Trieste TRS 60.5 2 CDG FCO MUC MXP NAP 5 Brindisi BDS 55.1 2 BGY BLQ BRU CDG FCO GVA LIN MXP VCE VRN ZRH 11 Ancona AOI 43.7 2 FCO MUC MXP 3 Reggio Calabria Calabria REG REG 26.5 2 BGY BLQ FCO LIN MAD TRN VCE 7 Crotone CRV 12.2 2FCO LIN 2 Rimini RMI 10 2 CGN FCO LUX MUC STR 5 Bolzano BZO 9.3 2 FCO 1 Trapani TPS 4.6 2 BGY FCO LIN GRO PMO PSA 6 Parma PMF PMF 3 2 FCO PMO 2 Pantelleria PNL 1.3 2FCO LIN PMO 3 Lampedusa LMP 0.6 2 FCO LIN PMO 3 Brescia VBS - 2 CDG FCO NAP 3 Cuneo CUF - 2 FCO TRN 2 Forlì FRL - 2 GRO PMO 2 Perugia PEG - 2GRO MXP PMO 3 PSR - 2 GRO LIN MXP TRN 4 Rome CIA - 2 BGY BSL GRO GVA LGW MAD LTN 7 Treviso TSF - 2 GRO 1 Albenga ALL: no scheduled flights in August 08; Aosta AOT: airport closed for maintenance Source: Author, compiled from data provided from OAG, 2008 Cagliari airport domestic connectivity "LOW COST SCENARIO"- August 08

Destination PWEW 06-07 SPLOne way flights Aug.08A irline(s) (No of operations) Venice VCE 1,066.0 1 88 Alitalia (31), MyAir (30), Meridiana (27) ● Domestic SPL Connectivity Index August 2008: 1.735 Turin TRN 820.3 1 55 Meridiana ● Average no. of possible intermediate stops available:5.78 Verona VRN 740.7 1 67 Meridiana ● Total no. of avail. itineraries with intermediate stop Naples NAP 543.3 1 76 Meridiana (total no. of intermediate stops available): 133

Palermo PMO PMO 243.4 4 1 31 Meridiana Genoa GOA 235.3 1 31 Air Vallee PWEW: average Passengers per Week Each Way (MIDT) Milan BGY 151.0 1 58 Ryanair (31), MyAir (23), MeridianaSPL: Shortest (4) Path Length (min. no. of steps) Pisa PSA 121.9 1 31 Ryanair Milan MXP 10.9 1 93 Volareweb (52), Easyjet (31), Meridiana (10) Rome CIA - 1 "Low cost" airline Forlì FRL - 1 "Low cost" airline ▼Possible stops (PSOs destinations highlighted; FRL and CIA airports in bold) 2 No. of possible stops ▼ Milan LIN 8,308.0 BRU CDG LGW MAD NAP PMO 6 Rome FCO 8,300.9 2 BGY BRU CDG CGN GOA GVA LGW LUX MAD MUC MXP NAP OSL PMO PSA STR TRN VCE ZRH VRN 20 Bolo ggQna BLQ 959.3 2 BRUCDGCGNLGWMADMUCNAPPMOTRN 9 Florence FLR 333.1 BRU2 CDG GVA LGW LUX MAD MUC OSL PMO STR ZRH 11 Catania CTA 227.3 2 BGY BRU CDG CGN FRL GOA GVA LGW LUX MAD MUC MXP NAP PSA STR TRN VCE VRN ZRH 19 Bari BRI 215.7 2 BGY BRU BSL CDG CGN GOA LGW LUX MAD MUC MXP STR TRN VCE VRN 15 Lamezia Terme SUF 68.3 2 BGY BRU BSL CGN LUX MUC MXP PSA STR TRN VCE VRN ZRH 13 Trieste TRS 60.5 2 CDG MUC MXP NAP 4 Brindisi BDS 55.1 BGY2 BRU CDG GVA MXP VCE VRN ZRH 8 Ancona AOI 43.7 2 MUC MXP 2 Reggio Calabria REG 26.5 2 BGY MAD TRN VCE 4 Crotone CRV 12.2 3 AIRPORT CHANGE REQUIRED FROM CIA - MXP/BGY TO FCO - LIN 0 Rimini RMI 10 2 CGN LUX MUC STR 4 Bolzano BZO BZO 939.3 3 AIRPORT CHANGE REQUIRED FROM CIA TO FCO 0 Trapani TPS 4.6 BGY2 GRO PMO PSA 4 Parma PMF 3 2 PMO 1 Pantelleria PNL 1.3 2 PMO 1 Lampedusa LMP 0.6 2 PMO 1 Br escia a VBS S - 2 CDG NAP 2 Cuneo CUF - TRN2 1 Perugia PEG - 2 GRO MXP PMO 3 Pescara PSR - 2 GRO MXP TRN 3 Treviso TSF - 2 CIA GRO 2 Albenga ALL: no scheduled flights in August 08; Aosta AOT: airport closed for maintenance Source: Author, compiled from data provided from OAG, 2008 Olbia airport connectivity with the MIDT most demanded European destinations - August 08

Destination PWEW 06-07One SPL way flights Aug.08 Airline(s) (No of operations) Munich MUC 494.5 1 33 Tuifly (23), Lufthansa (10) ● European SPL Connectivity Index August 2008: 1.412 Paris CDG 157.7 1 9 Meridiana ●ggpAverae no. of possible intermediate stops p available: 24.29 Geneva GVA 131.4 1 26 Easyjet ● Total no. of avail. itineraries with intermediate stop Düsseldorf DUS 69.7 1 5 Lufthansa (total no. of intermediate stops available): 340 Zürich ZRH 50 1 15 Air Berlin (9), Edelweiss (6) Brussels BRU 39.9 1 4 Jetairfly PWEW: average Passengers per Week Each Way (MIDT) Frankfurt FRA 37.4 1 9 Tuifly (23) SPL: Shortest Path Length (min. no. of steps) Barcelona BCN 29 1 27 Iberia Madrid MAD 25.7 1 23 Iberia Lugano LUG 24.8 1 14 Amsterdam AMS 23.7 1 9 Nice NCE 17 1 10 Welcome Air Vienna VIE 13.1 1 9 SkyEurope Prague PRG 6.3 1 9 SkyEurope Warsaw WAW 5.6 1 5 Centralwings Copenhagen CPH 4.9 1 8 Sterling Stuttgart STR - 1 28 Tuifly (23), Lufthansa (5) Hamburg HAM - 1 9 TiflTuifly London LGW - 1 49 Easyjet (44), Meridiana (5) Cologne/Bonn CGN - 1 28 Tuifly ▼Possible stops (PSOs destinations highlighted) No. of possible stops ▼ 29.2 Moskow SVO 2 AMS BCN BRU CDG CPH DUS FCO FRA GVA HAJ HAM MAD MUC MXP NCE PRG SXF VCE VIE WAW ZRH 21 London LHR LHR 11.6 2 AMS BCN BRU BSL CDG CGN CPH DUS FCO FRA GVA HAJ HAM LBA LIN MAD MUC MXP NAP NCE PRG STR VCE VIE WAW ZRH 26 Athens ATH 10.3 2 AMS BCN BRI BRU CDG CGN CPH DUS FCO FRA GVA LGW LIN MAD MUC MXP NAP NUE PRG STR SXF VIE WAW ZRH 24 Bucharest OTP 11 2 AMS BCN BRU CDG CPH CTA DUS FCO FRA GVA MAD MUC MXP PRG VIE WAW ZRH 17 Berlin TXL 4.9 2 AMS BCN BLL BRU CDG CGN CPH CTA DUS FCO FLR FRA HAJ HAM MAD MUC MXP NAP NUE PRG RMI STR VCE VIE WAW ZRH 26 Lisbon LIS 12.9 2 AMS BCN BHX BLQ BRS BRU BSL CDG CGN CPH FCO FRA GVA HAM LGW LIN MAD MUC MXP NCE PRG STR SXF VCE VIE WAW ZRH 27 St. Petersburg LED LED 2.2 2 AMS BCN CDG CGN CPH CTA DUS FCO FRA HAJ HAM LGW MAD MUC MXP NCE PRG SXF VCE VIE VRN WAW ZRH 23 Budapest BUD 7.1 2 AMS BCN BGY BRS BRU BSL CDG CGN CPH DUS FCO FLR FRA GVA HAJ HAM LGW MAD MUC MXP NUE PRG STR SXF TRS VCE WAW VIE29 ZRH Stockholm ARN 5.1 2 AMS BCN BLL BRS BRU CDG CGN CPH DUS FCO FLR FRA GVA HAJ HAM LGW LIN MAD MUC NAP NCE PRG STR SXF VIE WAW ZRH 27 Malaga AGP 3.3 2 AMS BCN BHX BLL BRS BRU BSL CDG CGN CPH DUS FCO FRA GVA HAJ HAM LBA LGW MAD MUC MXP NCE NUE PRG STR SXF WAW VIE29 ZRH Lyon LYS 3.1 2 AMS BCN BHX BLQ BRU BSL CDG DUS FCO FLR FRA HAM MAD MUC MXP NCE PRG STR SXF VCE VIE ZRH 22 Kiev KBP 5.2 2 AMS BCN BRU CDG CPH DUS FCO FRA GVA HAM LGW MAD MUC MXP NAP NCE PRG WAW VIE ZRH 20 Dublin DUB - 2 AMS BCN BGY BHX BLL BLQ BRS BRU BSL CDG CGN CPH DUS FCO FDH FRA GVA HAM LBA LGW LIN MAD MUC MXP NAP NCE PRG PSA STR SXF WAW VCE VIE34 ZRH Ankara ESB - 2 AMS BRU BSL CGN CPH DUS FRA HAJ HAM MUC NUE STR SXF VIE ZRH 15 Source: Author, compiled from data provided from OAG, 2008 Alghero airport connectivity with the MIDT most demanded extra-European destinations - August 08 ● extra-European SPL Connectivity Index August 2008: 2.133 ● Average no. of possible intermediate stops available: 3.00 ● TlTotal no. of favail. iliiiitineraries with i ihintermediate di stop

PWEW: average Passengers per Week Each Way (MIDT); SPL: Shortest Path Length (min. no. of steps) (total no. of intermediate stops available): 90

Destination PWEW 06-07 SPL ▼Possible stops (PSOs destinations highlighted) No. of possible stops ▼ Dakar DKR 8.7 2 MAD MXP 2 Casablanca CMN 4.7 BGY2 BLQ FCO MAD MXP TRN VCE 7 Tunis TUN 3.7 2 FCO MAD MXP 3 New York JFK 2.8 2 BLQ DUB FCO MAD MXP NAP PSA VCE 8 Buenos Aires EZE 2.1 2 FCO MAD 2 Istanbul IST 1.8 2 DUB FCO MAD MXP STN VCE 6 Montreal YUL 1.8 DUB2 FCO MAD 3 Newark EWR 1.5 2 DUB FCO MAD MXP 4 Tel Aviv TLV 1.0 2 DUB FCO MAD MXP NAP PSA STN VRN 8 Dubai DXB 0.7 2 FCO MXP VCE 3 Cairo CAI 0.3 2 FCO MAD MXP 3 Algiers ALG - FCO2 MAD MXP 3 Bangkok BKK - 2 FCO MAD MXP 3 Beijing PEK - 2 FCO MAD 2 Boston BOS - 2 DUB FCO MAD MXP 4 Delhi DEL - 3 AMONG THE POSSIBLE COMBINATIONS: via FCO/MXP/BLQ/MAD and AMS/BRU/CDG/FRA/LHR 0 Lagos LOS - MAD2 1 Larnaca LCA - 2 EMAFCOMXPSTN 4 Los Angeles LAX - 2 DUB FCO 2 Marrakech RAK - 2 BGY BLQ GRO MAD MXP VCE HHN NRN 8 Miami MIA - 2 FCO MAD 2 Mumbai BOM - AMONG3 THE POSSIBLE COMBINATIONS: via FCO/MXP/BLQ/MAD and AMS/BRU/CDG/FRA/LHR/MUC/ZRH 0 San Diego SAN - 3 AMONG THE POSSIBLE COMBINATIONS: via FCO/MXP/DUB and EWR/JFK 0 San Francisco SFO - 2 DUB 1 Sao Paulo GRU - 2 FCO MAD MXP 3 Shanghai PVG - 2 MXP 1 Tehran THR - AMONG3 THE POSSIBLE COMBINATIONS: via FCO and DAM; via FCO/MXP and KBP 0 Tokyo NRT - 2 FCO MXP 2 Toronto YYZ - 2 DUB FCO MAD 3 Tripoli TIP - 2 FCO MXP 2 Source: Author, compiled from data provided from OAG, 2008 AVERAGE FARES LEVEL ISSUE

Average fares of the Air One PSOs routes as % of the average fares of the Air One domestic free-market routes - 2007:

▼Air One free market routes▼ ▼Air One PSOs routes▼ (sample) FCO-CAG FCO-AHO LIN-CAG LIN-AHO BLQ-AHO TRN-AHO Rome FCO - Catania CTA 89.55% 89.55% 110.45% 105.97% 94.03% 94.03% Rome FCO - Palermo PMO 92.31% 92.31% 113.85% 109.23% 96.92% 96.92% Rome FCO - Genoa GOA 78.95% 78.95% 97.37% 93.42% 82.89% 82.89% Rome FCO - Brindisi BDS 85.71% 85.71% 105.71% 101.43% 90.00% 90.00% Milan LIN - Catania CTA 72.29% 72.29% 89.16% 85.54% 75.90% 75.90% Milan LIN - Palermo PMO 78.95% 78.95% 97.37% 93.42% 82.89% 82.89% Average domestic 74.07% 74. 07% 91. 36% 87.65% 77.78% 77. 78%

AHO=Alghero; CAG=Cagliari; BLQ=Bologna; TRN=Turin Calculations based on the average 2007 one-way fares (yields) recorded by each route (both ways), incl. crisis and fuel surcharggp;e and excl. airport taxes; source of fares: Air One , 2008

On Air One Sardinian PSOs routes, on average around 70% of the traffic was eligible for the concessionary fares (more than 75% in Winter and less than 65% in Summer on average); Air One (2008)