Profitability should not be main concern for rail operators

An SMRT train near Admiralty Station.
An SMRT train near Admiralty Station.ST PHOTO: CHONG JUN LIANG

When it comes to public transport systems, profitability should always take a back seat to the more pressing concerns of quality and affordability (Rail operators cannot sustain large losses for long, July 13).

Given the "public" nature of public transport, a rail system should be measured by its ability to serve the people, and not its ability to generate additional wealth for the operators of state-owned assets.

It is the fiduciary duty of public transport operators to plan for adequate preventive maintenance and remedial work, failing which costs are covered by the public purse, as with recent projects and rolling stock procurements.

The profitability of a metro system does not always have direct bearing on service quality compared with the competency and efficiency of the system's management team.

However, the farebox recovery ratio would show whether the transport operator can manage the system well to achieve a balance in operating costs against fares collected. When fares can cover operating costs, the farebox ratio is 100 per cent. Most metro systems in the world operate between 30 per cent and 60 per cent.

Apart from fare collections, this ratio also reveals prudent management, efficiency, competency, technical skills and service quality.

For instance, the Tokyo Metropolitan Bureau of Transportation was able to recover only 74 per cent of its operating costs from fare collection in the 2015 financial year. It nevertheless continues to provide very high-quality services to over 2.75 million riders each day.

In 2016, the Hong Kong MTR achieved a high score of 124 per cent and Tokyo Metro 119 per cent, while SMRT achieved 101 per cent in 2017.

Hong Kong's MTR Corporation is an excellent case study of how rail operators can leverage retail and residential floor space in and around stations.

All told, it would be unwise to raise fares until the economic situation recovers. If rail operators cannot get by without a few dollars more, neither can commuters.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on July 18, 2019, with the headline 'Profitability should not be main concern for rail operators'. Print Edition | Subscribe