ABSTRACT
Airline deregulation created a need for public service obligation (PSO) legislation in the European Union (EU) air transport reform packages. Thin regional routes, which previously survived thanks to cross-subsidisation from large monopoly routes, had little or no chance of survival under commercial conditions. In Sweden, cross-subsidisation did continue after deregulation in order to maintain a hub-and-spoke network structure, however generally with much reduced service quality to the remoter regions of Sweden. Arguably, air transport was and still is a necessary contributor to the social and economic development of many rural regions in Sweden. When accessibility was challenged, politicians were asked to impose government support in order to promote sustainable air transport services from the periphery to the centre of the country (Stockholm and beyond). This chapter examines the process and scope of PSO intervention in Swedish air transport. It also analyses the experiences of three major tendering processes and their disparate outcomes – and their lessons to learn for the future.
