[sustran] Chris Zegras on Profitable urban transit

[V. Setty Pendakur]

Paul Barter wrote:
> 
> 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                    /   (*)/(*)      \


By this time, all of us would have received the comments by Wendel Cox.  There are some 
very worthwhile profitaaable private sector operations in the world, in both the rich 
and the poor countries.  The question then is : what makes them profitable?  and are the 
lesons of profitability transferable to the developing countries.

The basic reasons for non-profitability of publicly operated urban taaaaaaaaransport 
systems vary widely in the world.  In China, for example, the answers lie in operational 
efficiencies and state of repair of the fleet, including overlaoding.  Here also the 
private sector is doing very well, compared the public sector which is losing money by 
tons...  In India, it is the leakage factor, the age, overlaoding, and the state of 
repair of the fleet.  By far the leakage factor contributes the highest amount to both 
the revenue and the expenditure side.  In the Philippines, the jeepneys, the private 
secotr operators, are profitable., while the publicly owned systems are not.  In 
Indonesia, the bigger systems are not prfitable but smaller systems are.

Yes, most of the systems in the USA and Canada are heavily susidized.  Then why and what 
are the reasons...........a host of them...........tons of literature and pontification 
on this topic.  some of the more important reasons are : fares not being related to 
distance ro cost but determined by politics, wages and workers agreements being 
antiquated, part-time workers for the peak or not, heirarchy of vehicles or not, added 
costs to the cost of the fleet because of speciall requirements such as low floors, 
natural gas fuelled vehciles, lifts for handicapped people...........many of these 
requirements dont apply to the emerging economies, at this time.  what are parts of our 
systes's lessons are transferable?  technology and maintenance methods, yes...and the 
rest..very questionable.

There is a lot printed on the planning and the operations aspects of transit but not on 
the knwledge transfer part.

Best wishes.  "propser, Live Long and Have Fun....." 
-- 
Dr. V. Setty Pendakur, Professor of Planning
University of British Columbia, 6333 Memorial Road
Vancouver, BC, Canada V6T 1Z2
voice : 1-604-822-3394, home : 1-604-263-3576
Fax : 1-604-822-3787