Wednesday, January 29, 2014

Hong Kong MTR profits one of the highest in the world for train operators

Recently there have been articles trying to validate why the transport fares must be raised. However, I just only need to look at the Hong kong MTR model to see that this is not true.

The Hong Kong MTR line knows for the fact that it operational costs will never be fully subsidised by fares because they have a dual mandate to keep trains operational and yet keep fares affordable. They therefore look at the whole issue holistically.

Now, is SMRT as a company losing money? It is not because they have rentals from shops that are subsidising the operational costs of the train. That is exactly what the Hong Kong MTR line is doing. The only reason why they are profitable is because they are following the exact same model. They are cross subsidising the fares with the rentals they have from the shopping malls at the station and rentals from the station itself.

The only difference between Hong Kong MTR line and the Singapore companies are that the MTR line is still owned by the government. Therefore, their mandate is not to make profits. I believe it is structured more like a non-profit organisation when the fares will be kept as low as possible and yet operate with the highest level of service.

If the whole objective is to raise the fares so that the operations can be covered fully by the fares, then please remove the privilege of only allowing the train operators to collect rentals from the stations. Since they are not cross-subsidising at all, might as well take the rentals from the stations and put it in a transport fund where it can be used to subsidise all Singaporeans that are taking the trains.

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