Abstract

Public Service Obligations are a key mechanism for countries to improve connections among islands and remote regions with the Continent. While Public Service Obligations are allowed by the European Commission, they represent an interference with free market competition, and impact on the entrance of competitors, prices and service frequency. This study employs Canarian air market data for 2002–2015 to econometrically evaluate the effects of two changes in European policy on the number of passengers transported. The results point to the need to make market access more flexible to benefit society by generating increases in the volume of passengers moved.