Public Service Obligations (PSOs) are usually put in place to connect a far off community with a major city. However, one flourishing city’s airport managed to get a PSO to one of the biggest cities in Europe – London. Here’s how Vilnius Airport managed to open a route to London City Airport using a PSO scheme.
A PSO to London City?
Public Service Obligations, or PSOs, are air services provided due to being vital for the economic development of the region they serve. They are protected routes, where carriers can claim subsidies for losses incurred by running the route, encouraging them to serve the route even if they are unsure of profitability.
Usually, they are implemented to connect outlying communities such as islands or rural villages with major cities. However, one airport managed to convince the European Commission to grant a PSO route from its base in Lithuania to London.
Justas Rinkevičius, Route Development Manager, Lithuanian Airports spoke at the recent AviaDev Europe conference about how his organization worked with other stakeholders to secure a PSO route from Vilnius to London City Airport.
“We managed to point out to the European Commission that we’re a region that lacks connectivity. We were losing a lot of direct investment from the UK by not having a direct flight. Considering these factors, we were able to launch a PSO scheme on that particular route.”
After some hard work and tenacious effort from the stakeholders involved, Lithuania was successful in securing the PSO route. Rinkevičius told us,
“I’m pleased to say we now have LOT Polish Airlines operating that route. The airline themselves are quite optimistic about that route.”
How did they do it?
With PSOs normally granted for things like connecting islands to a mainland, or connecting out of the way communities in rural areas with towns and cities, a link between Vilnius and London City is not something you would normally expect to see falling into this category. Nevertheless, Lithuanian Airports and their fellow stakeholders were convinced it would work. Rinkevičius said,
“It took us around two years to secure the PSO. We had to do a lot of homework and there were a lot of negotiations with Europe. The first year was all about planning, and then the second year was about laying out the project, setting KPIs, figuring out frequencies and suchlike.
“We had faith since day one. We saw the potential, we had the backing of a strong stakeholder in Invest Lithuania for the route, so we worked together with them. We were supported by the government too, being a government institution ourselves.”
The entities pushing for the route were further supported by industry data. Vilnius has firmly established itself as a hub of fintech innovations, and many of the businesses there have strong links to the UK, particularly in the City of London. However, Rinkevičius believes that having the backing of his government also helped to sway the decision.
“The political support was important; some legislations in Lithuania even had to be changed in order to allow us to launch a PSO scheme successfully. There were some times when we thought perhaps it was a dead end, but somehow we managed to get through the process successfully.“
LOT Polish began flying between Vilnius and London City in May this year. The route is operated by an Embraer E190, featuring economy, premium economy and business class seating. The route is operating twice daily during the week, and daily on the weekend. Flights are timed to allow for maximum working hours at either end of the route.
What about the LCC services?
Six months after Lithuanian Airports secured the PSO route to LCY, Wizz and Ryanair almost simultaneously announced the commencement of flights from London Southend to Vilnius. Those flights began in November this year; does this mean Lithuania will lose the PSO route?
In short, no. The flights being offered from Southend to Lithuania by the low-cost carriers are firmly targeted at the leisure and visiting friends and relatives market. The flights are too infrequent and poorly timed for business travelers, not to mention the fact that business people tend to not fly low-cost carrier if they can help it.
Although Southend has rapid connections into London, it’s quite a hike to the financial district when compared with LCY. Southend to a city center train station can be done in under an hour, but then there’s another 15 to 20 minute connection out to the east to Canary Wharf for the financial hub. From LCY, it’s a total journey of 15 minutes maximum.
The efforts by Lithuanian Airports to secure a PSO scheme on this route are impressive. The outcome was just what they wanted and, despite LCCs opening services to Vilnius too, the PSO route should not be affected. Even if, in the future, it does lose its PSO status, by then it will likely be well enough established that LOT can continue operating it anyway.