Of all the network-bound sectors of the economy, it is public short-distance and regional passenger transport which gets the worst ratings in the view of European consumers. Satisfaction is markedly better with regard to markets that have already been liberalised, such as telecoms, electricity utilities and air traffic. For Austrian public short-distance and regional passenger transport, customer satisfaction is still relatively high compared to international levels. And taking the modal split as a basis, public carriers still carry considerable weight (when seen against international rates), transporting, as they do, more than 40 percent of passengers in the Vienna area. Nevertheless, over the past years public short-distance and regional passenger transport has lost substantial ground to private motorised traffic. In spite of heavy subsidising, especially of the rail, shifts to public passenger transport, an objective that is desirable in both traffic and environmental terms, have been minor at best. The attractiveness of public short-distance and regional passenger transport depends not just on its funding but also on the incentives in connection with its structure and financing. At present, public short-distance and regional passenger transport costs some € 2 billion per year. Of this sum, two thirds are financed from public funds, much of it from the federal government, which has provided a financing guarantee of € 800 million p.a. for another decade. The restructuring and regionalisation effort started in 1999 will certainly improve cost awareness, but it still provides no sufficient basis to ensure the efficient use of funds in public short-distance and regional passenger transport. In addition to regionalising order processes and awarding greater financial responsibility to the ordering agencies, an important step to improve financial efficiency is tendering. Numerous international models have established that efficient tendering can substantially reduce the level of subsidies while maintaining the quality of service in public short-distance and regional passenger transport. The funds thus saved could be used to add to the service and improve the attractiveness of public passenger transport vis-à-vis private traffic. However, the statutory prerequisites to ensure effective tendering have not yet been introduced in Austria. The definition of profitability of public enterprises, which is very wide at present, screens large parts of the transport services from competitive tendering, and within the boundaries of profitability there are few incentives to improve cost efficiency. A further impediment to fair and non-discriminatory competitive tendering is raised by the organisational framework specified in the Act governing public short-distance and regional passenger transport.