Assessing the performance of Public Service Obligations air routes in Greece: A two-stage DEA approach

Abstract

This study aims at evaluating the performance of the Public Service Obligation (PSO) routes by selecting Greece as a case study since this country makes extensive use of the PSO program mainly due to the geographic discontinuity and remoteness of the islands. The research methodology engaged a two-stage approach. First, DEA models were applied to assess the technical efficiency of the Greek PSO routes. Subsequently, regression analysis was applied to the DEA scores to define the performance determinants. The analysis of the high-performance routes revealed that they either connect densely populated islands to major Greek cities or serve mainland points that are far apart. On the other hand, routes that recorded the lowest scores are those originating from secondary hubs, connecting small islands and/or serving multiple destinations. The regression results point towards more competition. It seems that open routes perform better than restricted ones and subsidies do not have a significant contribution to PSO efficiency. The results of this study may offer useful insights to the academic and aviation community, as well as practical implications to a broader spectrum of stakeholders interested in the evaluation of the EU air transport policies.