[sustran] Chris Zegras on Profitable urban transit

[Paul Barter]

Dear sustran-discussers, another relevant posting from the alt-transp list.

From: Christopher Zegras <chris at mailnet.rdc.cl>
Date: Mon, 18 Aug 1997 16:29:52 -0400
Subject: Profitable urban transit

Dear all,

Recently, the following was included in an Abhay posting:

>There will never be for profit private transit because it is virtually
>impossible for transit in middle income (eg. Israel) and rich countries to
>break even.  Transit costs 5x times autos per passenger mile including
>social costs and access times.

Is it really *impossible* for transit in middle income and rich countries to
break even? I recently read an article (which was also recently referred to
another alt-transp posting) on "illegal" jitney services in the nyc area;
while not legal (according to the article I read, transit unions refuse to
allow these services to be legalized), they are surely profitable transit.
And, if legalized they would probably become a lot more safer and perhaps
more widely used, even beyond low-income users.

I ask this question, though, wondering the fate of the profitable transit
services operating in Chilean cities, other latin american cities and other
parts of the developing world.  History from the industrialized world
suggests that as auto ownership continues rising, passenger mode share
shifts, and the famous vicious circle of transit decline ensues.  Indeed,
the primary cause of Chile's profitable bus operators is their "captive"
market; demand is inelastic since no real subsititue exists.  So, do we
accept Abhay's "never" as a fait accompli, that in the future the privately
run and profitable buses plying Santiago's (chile) streets will soon become
reliant on subsidies for survival?

Even though the case for some level of subsidy for bus systems has been
effectively argued for decades (Mohring, Herbert, 1972, "Optimization and
Scale Economies in Urban Bus Transportation," American Economic Review.),
the implementation of subsidies has been much less than optimal in most
places and the neo-liberal Chilean market considers such discussion
anathema.  So, the quesion becomes what will become of the Chilean bus
market as it loses its "captive" market?  We can only hope that Chile's
moderately regulated public transport market can respond as good capitalists
should do and offer services which can continue to compete with the
competition.  The possibilities for this to occur will soon be seen with the
launching in Santiago of a luxury "Executive" bus service to attract upscale
auto commuters.

We should be careful in assuming that what has happened in the United States
and other industrialized countries is the inevitable future for all.  I
cannot agree that it is virtually impossible for transit to break even and
would argue that Chile is already a working example, since it is now defined
as "middle income" (whatever that means, its per capita income is still less
than one-half of Israel).  The interesting thing will be to see where Chile
and similar countries go; I would argue that the U.S. could already learn a
thing or two about public transportation system management from the Chilean
model.  Might bus companies in the U.S. some day again turn a profit?

Regards,

Chris Zegras



 Christopher Zegras       http://www.iiec.org                 /\   /^\
 Instituto Internacional para la Conservacion de Energia /^\ /_o\ /   \
 General Flores 150, Providencia, Santiago, CHILE       /^^^/_\< /^^^^^\
 Tel: (56 2) 236 9232 Fax: 236 9233                    /   (*)/(*)      \