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Antonio Di Francesco AIR TRANSPORT PUBLIC

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Antonio Di Francesco AIR TRANSPORT PUBLIC 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 Bergamo, 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 Italy • 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 (Ryanair flies Rome-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 Europ ean Countries , thou gh to ver y different extents • France and Norway make an extensive use of the PSOs regulation • Spain 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 scoun ts 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 / Milan ¾ Cuneo - RFiii(FCO)Rome Fiumicino (FCO) ¾ Elba - Florence / Pisa ¾ Lampedusa - Catania / Palermo / 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 Meridiana: all routes excl. those to/from Alghero ¾ Air One/Alitalia: 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 r lines 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: Au thor, comp iled from d at a provid ed b y E urost at , OAG , ISTAT , ENAC Average % change of 69 domestic Italian North-South: + 7.25% • Passen scheduled pass./seats ALGHERO - PERFORMANCE PASSENGERS SCHEDULED MILAN LIN2000-2007 10,000 15,000 20,000 25,000 30,000 35,000 40,000 5,000 0 Jan-00 Source: Author, compiled from data provided by Eurostat, OAG, ISTAT, ENAC from compiled data providedby Eurostat,OAG, ISTAT, Author, Source: Apr-00 ggygppy er demandisinfluencedb Jul-00 Oct-00 ALGHERO-MILAN LINATE SCHEDULED PASSENGERS/SEATS LINATE ALGHERO-MILAN Jan-01 Apr-01 Jul-01 Tot. estimated scheduled pass. on board on board pass. scheduled estimated Tot. Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 y fli Jan-03 g Apr-03 hts su Jul-03 Oct-03 pp l Jan-04 y Apr-04 Jul-04 Oct-04 Scheduled seats seats Scheduled Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 ▲ 2nd PSOs star PSOs 2nd Jul-06 Oct-06 Jan-07 Apr-07 t 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 es t.
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