European Union

In the European Union, PSO routes are governed by Regulation (EC) No 1008/2008 and Council Regulation (EEC) No 3577/92. They must be put out to tender in the Official Journal of the European Union and be open to any carrier registered in an EU Member State. There are limitations on the number of passengers that can be transported when the route can continue to qualify for OSP. The successful bidder usually receives a monopoly on the route, but may have to comply with one or more conditions of service, such as the type and size of the vehicle, the schedule of services, the maximum fare paid for part or all of the seats offered, adherence to a common reservation system, the quality of service measured by a maximum percentage of canceled services, etc.

Some examples of air transport OSPs in operation today in Europe are routes from Dublin to Kerry and Donegal, routes between mainland Greece and the Greek Islands, routes from mainland Italy to Sardinia and Elba, routes between mainland France and Corsica, certain domestic routes within Sweden and Finland, and routes to the Scottish Highlands and Islands. In the context of liberalization of rail transport in Spain and the EU, the term has acquired importance since local and medium distance allocations will no longer be arbitrary.

International routes are not usually subsidized by OSP. This is due to the political principle that citizens should pay for international travel themselves, not through tax money. This is especially evident in Scandinavia, where there is very little international air traffic between cities, except through the capitals, where connections are commercially profitable. There are exceptions, such as the Stockholm-Narvik night trains.

USA

The Essential Air Service (EAS) is a public service obligation-style US government program enacted to ensure that small communities in the United States, which before deregulation were served by certified airlines, maintained commercial service. Its goal is to maintain a minimum level of scheduled air service to these otherwise unprofitable communities. This program arose in response to the Airline Deregulation Act, passed in 1978, which gave US airlines almost total freedom to determine which markets to provide domestic services and what rates to charge for that service.[3]​ The program is included in title 49 of the United States Code.[4]​.

The United States Department of Transportation subsidizes airlines to serve rural communities across the country that would not otherwise receive any scheduled air service. As of November 1, 2013, Essential Air Service subsidized 160 communities, of which 43 were in Alaska, whose service guidelines are different from those of the rest of the country. The decision on the degree of subsidized service that a community requires is made from the identification of a specific connection center for the community and, from there, the number of trips, seats and type of aircraft that are necessary to reach that operations center is determined.[3]​.

Specification

The authority calling for the tender may be a ministry of transport, a county, a province, a state "State (subnational entity)"), a municipality or other regional or local authority, or it may be a transport authority or other ad hoc organization responsible for some type of transport in an area. To put services out to tender, an authority must have an interest in subsidizing transportation. It must also have the authority to prevent other interests from exploiting competing services in parts or all of the system.

The authority will specify a series of service conditions, such as frequency, vehicle size, timing of services, maximum permitted "Tariff (Public Service)" fare and/or other specifications related to service and quality. The bidder may specify a net or gross contract. In the latter, the operator bids for the entire operating costs, and all income goes to the authority; With net contracts, the operator will obtain all the income, and will bid only for the difference between the tariff income and that necessary to obtain the desired profit. Using raw contracts reduces the operator's risk as it does not need to estimate the number of users, and will typically result in lower bids as there is a lower risk premium on each bid. This option also facilitates free transfer between operators and modes.

Net contracts incentivize operators to increase the number of users and reduce risk for the bidder. Gross contracts typically have higher administrative costs for the authority administering the rates. Urban public transport with transport authorities typically operates on gross contracts, while airlines and ferry routes typically operate on net contracts.

Typical uses of PSO include regional air services in Northern Norway or Ireland, where airlines serve sparsely populated areas that are not profitable for non-subsidized carriers. Rail services may not be profitable even on major routes, so public subsidies are sometimes offered through OSP. This has been very popular in Germany. Most cities subsidize their public transportation, and where transportation is provided by private companies, it may be provided through OSP. Other common OSP services are ferries, such as routes to Gotland in Sweden, or car ferries along Norway's road network. Ferry routes serving Hong Kong's outlying islands are also subsidized, as a result of rising oil prices and therefore operating costs.

European Union

In the European Union, PSO routes are governed by Regulation (EC) No 1008/2008 and Council Regulation (EEC) No 3577/92. They must be put out to tender in the Official Journal of the European Union and be open to any carrier registered in an EU Member State. There are limitations on the number of passengers that can be transported when the route can continue to qualify for OSP. The successful bidder usually receives a monopoly on the route, but may have to comply with one or more conditions of service, such as the type and size of the vehicle, the schedule of services, the maximum fare paid for part or all of the seats offered, adherence to a common reservation system, the quality of service measured by a maximum percentage of canceled services, etc.

Some examples of air transport OSPs in operation today in Europe are routes from Dublin to Kerry and Donegal, routes between mainland Greece and the Greek Islands, routes from mainland Italy to Sardinia and Elba, routes between mainland France and Corsica, certain domestic routes within Sweden and Finland, and routes to the Scottish Highlands and Islands. In the context of liberalization of rail transport in Spain and the EU, the term has acquired importance since local and medium distance allocations will no longer be arbitrary.

International routes are not usually subsidized by OSP. This is due to the political principle that citizens should pay for international travel themselves, not through tax money. This is especially evident in Scandinavia, where there is very little international air traffic between cities, except through the capitals, where connections are commercially profitable. There are exceptions, such as the Stockholm-Narvik night trains.

USA

The Essential Air Service (EAS) is a public service obligation-style US government program enacted to ensure that small communities in the United States, which before deregulation were served by certified airlines, maintained commercial service. Its goal is to maintain a minimum level of scheduled air service to these otherwise unprofitable communities. This program arose in response to the Airline Deregulation Act, passed in 1978, which gave US airlines almost total freedom to determine which markets to provide domestic services and what rates to charge for that service.[3]​ The program is included in title 49 of the United States Code.[4]​.

The United States Department of Transportation subsidizes airlines to serve rural communities across the country that would not otherwise receive any scheduled air service. As of November 1, 2013, Essential Air Service subsidized 160 communities, of which 43 were in Alaska, whose service guidelines are different from those of the rest of the country. The decision on the degree of subsidized service that a community requires is made from the identification of a specific connection center for the community and, from there, the number of trips, seats and type of aircraft that are necessary to reach that operations center is determined.[3]​.