ABSTRACT
The provision of air transport services is an important factor for regional integration and connectivity and a critical tool for regional development. The need to connect communities forms an integral part of national policies in several countries and territories. Public service obligations are short-term contracts entered into by the government with airlines that typically specify the service levels, including flight frequency, type of plane, scheduling and the fares offered on the route. Traffic distribution rules involve a system of cross-subsidisation between dense routes and thin routes so as to guarantee all regions access to air services provision and to ensure that airlines fulfil their social obligations. Airlines offering services in remote areas are entitled to a range of benefits, including tax exemptions, self-ground handling and risk sharing through seat underwriting, whereby a certain threshold number of seats for a specified operator are blocked by the government at a prespecified air fare.
