For each starting country (s), the set of destination countries which it's possible to reach must form some consecutive interval (A_s..B_s), such that (A_s \leq s \leq B_s).
We can begin by assuming that (B_s = s), and then repeatedly increase (B_s) until it has reached either country (N) or the first country after (s) which is unreachable from it. As long as (B_s < N), it should be incremented if flights are allowed from country (B_s) to country (B_s+1), which is the case if and only if (O_{B_s} = I_{B_s+1} =) "Y".
The above process can be performed for each starting country (s), and repeated similarly to compute each (A_s) value. (A_{1..N}) and (B_{1..N}) may then be used to populate the required (P) matrix. Each part of this solution takes (O(N^2)) time.