Public Transport Loss Vs Profit

[Admet75]

The age old argument that appears from time to time especially during and after the outsourcing of public transport services.

Lets look at the arguments for and against for both a loss and profit:

Loss- Pro's
- Continues to be government subsidised
- Possibly working more for the customer
- KPI's are higher and have to be achieved before any funding is given
- The Carrot and stick approach is successful here
- Passengers feel confident in boarding a vehicle when they know the operator is not chasing boarding's and revenue at the same time. This happened in Auckland many years ago on one road you would have two to three operators competing for passengers going into Britomart for example.
- loss businesses don't pay company tax (I think its currently 27.5% to 33%)

Loss- Con's
- some businesses cannot survive on continual losses because they have not branched out or diversified their business- look at 13Cabs they now 13 deliver and they deliver Woolies groceries.
- the morale of staff can be very low in loss making business and these businesses sometimes save money by not paying staff full entitlements such as penalty rates etc or operating vehicles which are deflectable or not well looked after.


Profit- Pros
- Shareholders win and possible employees have a higher morale
- Possible better services are provided but can be seen an too many services. For example overseas some cities operate services every 2 mins during the day and 6 mins at night up until 12am even though the demand is not there after 7pm for a 6 mins service
- Possible pay increases in line with company policies and not reliant on FWA to decide the payrate for various places

Profit- Cons
- Sudden decrease in profits means less services to operate and possibly not fulfil KPI's
- Pay increase for CEO's but not for the worker below
- Aiming for a profit possibly means aiming to please shareholders or owners of the company but not the most important assets- your clients and employees
- When times are tough some governments see profit making as having deep pockets to it means Governments won't help them and will not increase subsides
- Over estimating patronage and profit and revenue targets leads to a huge loss in the long term- look at National Express in Melbourne.

Whilst it would make sense to some people to operate a public transport at a profit it would require a very high level of service, relatively high fares (sometimes way beyond the lower socio income level passengers that they can afford).

However a loss making entity can operate a high level service but be heavy reliant on government funding.

Just a quick interesting fact Adelaide Metro recovers 23% whilst sadly Wikipedia can sometimes be unreliable I hope this is: https://en.wikipedia.org/wiki/Farebox_recovery_ratio

[Merc1107]

(For Profit Operation) Possible better services are provided but can be seen an too many services. For example overseas some cities operate services every 2 mins during the day and 6 mins at night up until 12am even though the demand is not there after 7pm for a 6 mins service

If the patronage wasn't there, I cannot see any operator or operators deliberately running such a high-frequency late night service. There's no way that would be profitable.

I'm more of a fence sitter. I believe public transport is a public service, but I do not believe that should mean we just throw oodles and oodles of money at it in the vain hope of that making it better. No, everyone involved needs to be conscientious about delivering the service efficiently and balancing the need for community benefit against value for money for the taxpayer, that is, whether you need to run more 'milk run' bus services versus using the same resources to carry a full bus of passengers on some other trunk service. Presumably that is the role of contracted services, to bring in outsider expertise into an operation and ensure things are running as efficiently as they can. Yes, am aware this isn't always ideal for the employee driving the bus, train or tram; perhaps that is another area we have to be mindful of.

[flaneur]

Public transport doesn't have to make a profit as the Government can recoup more in economic development, the public transport service is simply a catalyst for this growth. Public transport services can attract commercial and residential development or TOD - transit oriented development, something this Government is slow to capitalise on the real value of public transport, supported by Reports by Melbourne University and RMIT. The Marshall Government sprouts its new 20
yr plan but will do little to achieve TOD's, even worse in regional areas where public transport is non existent or poor, let alone having a fast train service from the regions

[Skexis]

Would it be possible for a bus network anywhere to run at a profit when you consider the cost of buying a new bus? Even over a 25 year lifespan of one bus I doubt fare revenue would fully cover the purchase and day to day running costs.

[Merc1107]

Would it be possible for a bus network anywhere to run at a profit when you consider the cost of buying a new bus? Even over a 25 year lifespan of one bus I doubt fare revenue would fully cover the purchase and day to day running costs.

I don't think public transport can run at an overall profit anywhere in Australia. There will, naturally, be fringe examples where the patronage is high enough to pay the full cost of the service, but this certainly wouldn't be the case out in sprawling suburbia where the bus can't really go anywhere useful, other than the local train station and maybe a shopping centre.

That nation we sometimes look to for public transport innovation (England) seem to be one of the more recent examples of allowing market forces run bus services... Suffice it to say, I haven't seen or heard particularly good examples of where this has worked out in the long-run. E.g., this 'Bus Wars' documentary from 1987: https://www.youtube.com/watch?v=Hltajs9dI6Y
Does anyone have any good counter-examples where a for-profit operation has been able to grow and sustain patronage since the rise of the personal car?