Sustainability criteria are expected to gain prominence in European tenders for subsidised Public Service Obligation (PSO) routes launched after 2026, strengthening demand for fuel-efficient and SAF-ready aircraft. The changes, which would also create a fertile ground for the adoption of low and zero-emission aircraft, will be formally proposed by the European Commission by mid-2026 as part of a revision of the EU Air Services Regulation, which since 2008 sets basic requirements for PSO operations in the EU – equivalent to Essential Air Service (EAS) operations in the US.
“We have to look at the future, [to] what I would call the greening of PSOs – giving the possibility to [EU] member states to include environmental criteria in the PSOs. In fact, regional connections which have a distance which could allow the development of cleaner, electric aircraft could be reflected in the future PSO, also in terms of [the] length of the PSO [contracts],” Eddy Liégeois, head of aviation policy at the European Commission’s Mobility and Transport department (DG MOVE), told the European Regions Airline Association (ERA) conference in Copenhagen just over a month ago.
The expected reforms, which the industry refers to as the ‘greening’ of PSOs, follow a study published by ERA last year in which member airlines welcomed the idea of strengthening environmental criteria in the EU’s PSO framework. The study also puts forward the idea that short, “thin” routes could, with additional funding and longer contracts, support the introduction of low and zero-emission aircraft.
Ishka speaks with ERA director general Montserrat Barriga and ERA policy manager Roberta Filosa to explore how PSO reform could boost European government support for regional aviation and drive demand for cleaner aircraft.
What are PSO routes?
PSO routes are flight routes that may not be commercially viable but are necessary for connectivity and accessibility. The government compensates airlines to ensure sufficient flights are operated on these routes. Countries that are part of the European Single Aviation Market (EU member states plus Norway and Iceland) and the UK (by virtue of its past EU membership) follow rules set by the EU Air Services Regulation No. 1008/2008 to create and maintain PSO tenders.
As of March 2024 there were 165 routes covered by PSO contracts in the EU – roughly similar to the 176 PSO routes in existence as of 2019 when the UK was still an EU member. According to an estimate by ATR using 2023 data and matching 190 EU PSO airline routes with OAG schedule data, 83% of PSO flights are flown by regional aircraft (63% ATR, 16% other turboprop, 5% regional jets) with the remainder flown by narrowbodies (it is worth noting that the 2024 list also includes a small number of widebody flights between Metropolitan France and French overseas territories).
Although the current 165 routes account for less than 2% of all scheduled flights between EU airport pairs, they are predominantly short-haul domestic operations. This makes them ideal candidates for regional and subregional aircraft — and thus a natural testing ground for new propulsion technologies.
ERA’s demands for PSO reform
ERA is hoping that the 17-year-old EU Air Services Regulation will finally be revised during the new European Commission mandate that began at the end of last year. Last June, the association published its first study on the practice of PSOs in Europe based on a survey of 14 ERA members in 11 countries. “This is really the first document at EU level that gathered how the PSO framework is currently implemented,” explains Filosa, author of the study.
In the study, ERA recommends additional funding (including effective aid tools for new PSO routes) and cthe reation of new routes. It also calls for allocation of more powers to EU regions involved in the PSO process and decision making, process improvements, force majeure contract renegotiation leeway (based on COVID-19 lessons), EU261 (passenger rights law) accommodations for PSOs, and changes to facilitate airlines’ investment in fleet renewal, such as by extending PSO contract duration beyond five years (currently most PSO contracts are four years and five for outermost regions).
Relevant to aviation decarbonisation, the report also advocates for implementing environmental criteria in PSO tenders such as use of cleaner aircraft and/or SAF – the greening of PSOs.
Greenifying a PSO
ERA stresses that promoting and standardising sustainability criteria in the PSO framework should not come at the expense of competition. “Greening PSOs for us is important, but at the same time it's tricky because you don't want only certain airlines operating certain types of aircraft to be able to provide a PSO service, and being able to successfully compete for a PSO tender,” cautions Barriga.
Rather than requiring low-emission aircraft or cleaner energy sources in future tenders, ERA believes environmental performance should be weighed equally with other competitive factors, like fares or frequencies. ERA proposes that tenders include a best-in-class aircraft comparison, prioritising at first lower per-passenger emissions equipment (e.g. turboprops perform better on short routes than similar-sized jets), SAF readiness (e.g. ATR and Pratt & Whitney are targeting 100% SAF compatibility on PW127-XT engines), or, when they become available, low and zero-emission aircraft using hybrid, battery, or hydrogen propulsion.
“At a certain moment we have to create a business case for the airlines to invest in a new aircraft […] it's a risky investment decision, these aircraft that have never flow before, and you have to incentivise airlines,” explains Filosa. To further support new technology propulsion, ERA is proposing the creation of a “dedicated PSO structure” for new aircraft technologies on “thin” routes shorter than 500km (Ishka estimates that three quarters of routes covered by PSOs today are below 500km).
Those dedicated structures would have longer service contracts and additional financial support. EU ETS revenues from aviation – set to increase from 2026 with the phase-out of free EU ETS allowances for airlines – should, ERA argues, be used to support the introduction of aircraft. Another solution could be a financing mechanism backed by the European Investment Bank (EIB). “It is a multi-prong approach,” adds Barriga, underlining that ‘Green PSOs’ would be just one measure to support the adoption of next-generation aircraft.
New OEMs on board
ERA’s interest in supporting new technology aircraft goes hand in hand with the interests of its members – both airlines and OEMs. Among ERA’s 221 members are the main regional aircraft manufacturers (ATR and Embraer) as well as 10 new technology propulsion aircraft and propulsion developers.
At the conference in Copenhagen Ishka SAVi engaged with both new aircraft developers and established manufacturers, all of whom supported regulatory reform as part of a broad basket of measures to de-risk investment in new technologies. One new propulsion OEM advocated for policy mechanisms to develop recharging infrastructure at underutilised small airports, aiming to induce demand for new point-to-point subregional routes. Meanwhile, a representative from an established OEM believed that incorporating best-in-class environmental benchmarks into PSO tenders would be advantageous.
Last month at the ISTAT Sustainability Symposium in Dublin, Munich-based battery-electric aircraft developer Vaeridion also alluded to short-haul PSO services as an ideal market for its nine-passenger single-motor aircraft. “We’re currently looking at the first 300 aircraft being placed in Northwestern Europe,” revealed CEO Ivor van Dartel. “If you count the need for movements in the public service obligation (PSO) routes – in Scandinavia alone – that already means a couple hundred [aircraft].”
A proposal by mid-2026, or sooner
A call for evidence on the Air Services Regulation revision is expected imminently, and Liégeois noted at the ERA event that the European Commission is already working on an impact assessment of the regulation. ERA expects the Commission to move relatively quickly on developing a proposal, as work was already undertaken by the previous Commission (2019-2024) following a 2022 public consultation (see p. 2, third set of problems). That preliminary work, ERA understands, foresees the inclusion of environmental criteria in the upcoming proposal.
The revision of the Air Services Regulation is not the only planned review of EU aviation policy seeking alignment with the EU's decarbonisation goals. According to a public consultation on the revision of the 2014 Guidelines on State aid to airports and airlines – which ran from December 2024 to March 2025 – one of the “likely impacts” of the revision will be to “align the aviation guidelines with the priorities of the Green Deal.” Once updated in 2027, the guidelines could result in government support for airlines and airports being tied to decarbonisation requirements.
The Ishka View
A green transition that “leaves no one behind” is something the European Commission strongly insists on. As part of that thinking, regional air connectivity – much of which is underpinned by PSO contracts – plays a vital role in ensuring that geographically isolated or challenged regions in Europe maintain essential connectivity. These are not expendable short-haul flights, but essential air services. Combining governmental support for these routes with criteria that, where possible, prioritise cleaner aircraft makes sense and presents a real opportunity to use these routes as a market-shaping tool.
In parallel, political momentum for clean regional and sub-regional aviation has been growing in recent years. In late 2023, the European Parliament Committee on Transport and Tourism published a report on electric aviation which called for “the adaptation of the aviation regulatory framework to facilitate the entry into the market of aircraft that use electric and hydrogen-powered propulsion.” Among those adaptations, MEPs noted, was an invitation to the Commission to “ensure that electric flights serve short regional routes for the purposes of PSO under the applicable EU rules.” That resolution was later adopted by the Parliament with a large majority.
