Sunday, November 1, 2009

SBS Results show that lower fares need not mean lower profits

Recent SBS results show that it's net earnings hit S$100m. What does the results imply? It implies that all those people who said that lower fares translate to lower profits are dead wrong.

I remember I was arguing with someone some time back regarding transport fares. My stand was that based on what I observed, if the public transport fares are lowered or subsidized more during transfers, it will attract more people in taking public transport and thus, the public transport operators in actual fact can earn more because of the increase in ridership.

Furthermore, I feel that if you can ensure that the services are reliable, more people will be willing to ditch their cars for public transport. Personally I feel that for buses, every 5 to 10 mins during peak hours and 10 to 15mins during off-peak hours is the point where most people will make the jump. For trains, it will be 2 mins during peak hours and 5 mins during off-peak hours.

Reasoning behind this is simple. Cars are darn expensive here (not including all the ERPs and parking). So if you ensure the services are reliable, people will naturally make the jump because they are able to plan their time appropriately.

All those talk about seeing the demand first before pushing up the supply is B.S. (in the case of Singapore's public transport), like the other time where statistics were given on how many people you can cram in a train and used that as a basis that the trains are not crowded.

Go with what you see on the ground and not on what the books tell you.

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