Regional aviation and the PSO system - Level of Service and social efficiency

The variation in Level of Service (LOS) and the objective of the Public Service Obligation (PSO) system raises the need for a method for determining the LOS based on social efficiency measures. Such a method is developed for assessing PSO and LOS in Norway. This paper presents and discusses this method, which may be relevant for other countries that employs similar supporting systems for air transport. A stepwise procedure is suggested for assessing PSO routes: Firstly, a framework for deciding upon LOS for air transport under PSO is presented. Secondly, we present a way of doing rough calculations of socio-economic profitability of PSO routes compared with best alternative transport. Finally, a model is presented which refines these calculations. One finding from the model simulations is that loosening the LOS restrictions on this type of regional aviation may lead to increased ticket prices and a reduced LOS. PSO restrictions may lead to a situation close to social optimum if wisely chosen. The most important step in future research is probably to test and refine the numerical model.