Continue reading this on our app for a better experience

Open in App
Home News Transport

Fare hikes and overseas expansion to give transport operators a lift

Benjamin Cher
Benjamin Cher • 6 min read
Fare hikes and overseas expansion to give transport operators a lift
SINGAPORE (Dec 20): Transport operators in Singapore have been battered by low public-transport fares as well as the entry of another ride hailing startup, Gojek.
Font Resizer
Share to Whatsapp
Share to Facebook
Share to LinkedIn
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

SINGAPORE (Dec 20): Transport operators in Singapore have been battered by low public-transport fares as well as the entry of another ride hailing startup, Gojek.

However, after Dec 28, public transport fares for adult commuters using travel cards will go up by 7%, or about nine cents, per journey. This group makes up about 65% of all public transport trips. Those using cash on buses or single-trip tickets for train rides will see an increase of 20 cents per trip.

This hike comes after Transport Minister Khaw Boon Wan said in July that the fare formula and fare revision would be reviewed to take into account the rising operating costs of the MRT system.

Khaw said government subsidies had “exceeded their intended scope” in funding public transport infrastructure and to continue to rely on them would be unsustainable.

“As it is, the additional costs have been partly covered by increased government subsidy and partly absorbed by the operators who have been incurring substantial losses. This is certainly not sustainable,” Khaw said during a parliamentary session.

Rail reliability has improved, but at substantial expense to both the operator and the government, he added. The MRT system clocked 1.08 million train-km between delays for the first nine months of the year, compared with 955,000 train-km in the first six months of 2019.

Between 2016 and 2017, costs for running the rail network grew about $270 million. Khaw noted that operators are bearing the losses as commuter fares do not cover operating costs.

The Land Transport Authority of Singapore (LTA) has transitioned to the New Rail Financing Framework and the Bus Contracting Model where the government owns the assets and infrastructure while the operators maintain and run the services.

Meanwhile, taxi operators continued to be buffeted by ride hailing companies. Statistics from LTA show that the total taxi fleet in Singapore fell 7.2% to 18,890 in October from 20,375 in January.

The number of taxi vocational licences fell steadily between January and August, from 416 a month to a low of 240 a month. This number rebounded from 250 in September to 624 in October.

On the other hand, the fleet of private-hire cars grew 15.7% to 75,878 in October from 65,571 in January. The increase comes as Indonesia’s Gojek marked its first year in Singapore by completing some 30 million trips. The start-up also announced a partnership with Trans-Cab that allows Trans-Cab drivers to use the platform to fulfill private-hire trips.

These developments have impacted the two transport sector companies, SBS Transit and ComfortDelGro, which are relying on overseas revenue to lift results. In 3QFY2019 ended September, SBS Transit saw earnings rise 1.5% to $20 million, from $19.7 million a year ago. Revenue grew 3.6% to $364 million, from $351.4 million.

Top-line growth was driven by higher revenue from the public transport services segment, which rose 3% to $10.1 million, owing to a fare hike last December. Average daily ridership on SBS Transit’s Downtown Line rose 4.1% while that on the NorthEast Line grew 1.2%. Average fares for DTL and NEL rose 7.8%, or 5.2 cents, and 2.6%, or 1.8 cents, respectively.

However, higher operating costs from repair and maintenance work, depreciation of assets, wages and other sources also grew in tandem, rising 3.4% to $338.6 million from a year ago. Operating profit recorded a slight dip of 4.5% to $14.8 million.

SBS Transit’s commercial services segment rose 19.3% to $16 million for 3QFY2019, owing to higher advertising revenue, helping to drive operating profit.

SBS Transit sees revenues from the public transport services segment growing. Bus service revenue is expected to be higher as the Seletar and Bukit Merah bus packages will record their full-year contribution, having started in March 2018 and November 2018 respectively. Rail service revenue is also expected to rise with higher ridership and the impending fare increase on Dec 29, while the commercial services segment is expected to maintain its revenue.

Nevertheless, the public transport operator expects to face significant cost pressures as overall operating costs increase with the full-year impact of the Seletar and Bukit Merah bus packages. In addition, there will be higher maintenance requirements at the NEL, DTL and the Sengkang and Punggol LRT (SPLRT) lines. Other costs are also set to increase. These include wage hikes and larger repair and maintenance bills as the train fleet expands and the bus fleet ages.

“Notwithstanding the impending fare increase, fare revenue will not cover [the] rising operating and maintenance costs of the rail lines. In particular, higher maintenance is required as the NEL and SPLRT are in their mid-life cycles, and DTL has come out of its defect liability period for its maintenance,” says SBS Transit in its results announcement.

“We will also continue to invest in predictive maintenance capabilities so as to keep up with reliability standards in a sustainable manner,” it adds.

Meanwhile, ComfortDelGro saw revenue for 3QFY2019 ended Sept 30 rise 1.1% to $979 million while earnings fell 10.8% to $70 million. The increase in revenue was driven by new acquisitions in the public transport services business, which was partially offset by unfavourable foreign currency translation from the weaker pound and Australian dollar.

Operating profit for the quarter was 4% lower at $108.9 million. The main reason for the lower operating profit was the fiercely competitive taxi business in Singapore, but this was offset partly by contributions from new acquisitions in its Australian bus business.

A breakdown of ComfortDelGro’s business units shows the taxi business bore the brunt of the earnings drop, with a 9.6% dip in revenue to $162.1 million due to a smaller operating fleet. This also resulted in lower revenue for the automotive engineering services business, which fell 10.3% to $61 million because of the lower volume of fuel sold.

“The global economic and political environment has weakened further in the last few months and this has weighed on our businesses, which continue to face intense competition. Despite the significant challenges, we have managed to grow our top line, with stronger contributions from our overseas businesses. Our Australian operations, in particular, have performed well, buoyed by the acquisitions that we made last year. Our public transport business continued to gain strength, growing both in terms of revenue and profit,” says Yang Ban Seng, managing director of ComfortDelGro.

While ComfortDelGro expects revenue from its local public transport business to grow, it says the business will still face significant cost pressures from operating and maintenance costs. Revenue from the Aussie bus business is expected to grow while the UK bus business revenue is expected to stay flat.

Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
© 2024 The Edge Publishing Pte Ltd. All rights reserved.