Managerial perceptions of incentives for and barriers to competing for regional PSO air service contracts

• Language/culture is not a detriment to cross-border competition for service contracts.
• Authorities should better align the PSO tender processes to air operators' needs.
• All parties involved desire growth in route patronage.
• Poor contract incentives, time scales, route ownership and marketing are problematic.
• Tender information should be circulated more broadly and updated more regularly.

While it has been established in previous research that public support for air services to peripheral or economically underdeveloped regions is justifiable, the current EU Public Service Obligation (PSO) air service mechanism and particularly, the level of competition for PSO contracts, can be improved. This paper sets out to identify best practice for PSO contract sponsors by viewing issues from an air operator perspective. The heart of this paper is a survey of European regional airlines. We examine the airline managers' perspectives in relation to assessing and bidding for PSOs on scheduled air services. Possible areas for improvement include issues around the dissemination of PSO opportunities in the single market, adequate response times for proposal preparation/submission and preparing for the service launch date as well as incentives to develop the air service during the contract period in terms of revenue and patronage. We also highlight issues related to entry barriers, risk sharing, transparency and effectiveness of PSO contract awarding procedures.