Cost-fare revenue gap too big to bridge

A MRT train passes by Ang Mo Kio Avenue 8.
A MRT train passes by Ang Mo Kio Avenue 8.PHOTO: ST FILE

Mr Paul Chan Poh Hoi's letter (Poor planning - root cause behind SMRT Trains' losses, Aug 5) contained two inaccuracies.

First, he claimed that: "Just last year, SMRT reported that it could recover 101 per cent of spending from fare box collections."

This is not correct. For the financial year ended March 31, 2018, SMRT Trains' earnings before interest and taxes and profit after tax were both negative and were losses of $84 million and $86 million, respectively.

Second, he claimed that SMRT Trains' maintenance-related expenditure (MRE) in FY2018 was 62 per cent of costs. This is not correct.

MRE constituted 62 per cent of rail fare revenue, and not of costs.

In fact, in FY2019, the MRE figure has gone up further to 71 per cent of rail fare revenue.

This was necessary as we ramped up maintenance costs to deliver a higher level of rail reliability.

The fact remains that due to ramped up maintenance, total operating cost has far exceeded fare revenue and is not sustainable.

We will try to minimise cost but the gap between cost and fare revenue is too big to be bridged.

Nevertheless, we will press on with cost reduction efforts, including our Kaizen initiatives, and greater use of technology.

We also benchmarked our cost efficiency against other metros.

Based on the latest CoMET (Community of Metros) and Nova survey, which provides international benchmarking, SMRT is among the top 30 per cent in terms of cost efficiency.

Lee Ling Wee

Chief Executive Officer

SMRT Trains

A version of this article appeared in the print edition of The Straits Times on August 08, 2019, with the headline 'Cost-fare revenue gap too big to bridge'. Print Edition | Subscribe