Efficiency and Sustainability of Regional Aviation on Insular Territories of the European Union: A Case Study of Public Service Obligations on Scheduled Air Routes among the Balearic Islands

Mediterranean islands of the European Union (EU) have traditionally suffered from a lack of regularity in supplying public transportation due to the high seasonality of the demand for scheduled transport services. The insular fact forces people and goods to be carried either by sea or air, and therefore needs to actively stimulate interest in operating specific routes by proper carriers. As regional economies on insular territories also have a tight dependence on tourism, it is vital to achieve an appropriate balance between the need for effective public transportation and sustainable means of transport. This paper aims to provide an approach to the Public Service Obligation (PSO) system imposed on air routes serving the regional transport needs of the Balearic Islands. This study has analyzed data relating to freight and passenger traffic in the period between 2004 and 2019 from scheduled air services linking Palma de Mallorca with Ibiza and Menorca, as well as those between Menorca and Ibiza, and to their respective short-sea links. Results obtained in the research suggest that PSO impositions, together with significant improvement in the resident subsidy schema (from 50% to 75%), have recently led to a sharp increase in the demand for passenger air services on these routes; thus, avoiding the tender for the award of a public contract. However, it has led to a dramatic fall of freight transport on air routes concerned, as such, public intervention on the air market has only sought to ensure the mobility of passengers.