Response to CAN’s position on bus route rationalization – by Fred

The letter below was received in response to our recent blog post describing our position on bus route rationalization, http://www.hongkongcan.org/eng/2010/01/5126/.

Hi,

I read your position paper on the route adjustments, and I would like to urge you to reconsider your position. Morally, I’m a big supporter of CAN, but with respect to your recent position paper, I think your position hurts your end goal of reduced pollution via bus fleet replacement.

This is one man’s view of the bus industry in Hong Kong. I believe that the bus industry is probably highly unprofitable and a burden on its shareholders.  There are no fat profits that we can look to grab as a source of replacement of the bus fleet. I would speculate that this lack of profitability probably has to do with the burden of operating a large number of unprofitable routes and frequencies. In the 1990’s the government pressurized China Motor Bus to renew their fleet. China Motor Bus refused to throw good money after bad, and shut down the bus company. Thankfully the government then had alternative parties interested willing to invest in this business. But what about today? What lever does the government have to force the bus companies to fund fleet renewal when those companies refuse, as China Motor Bus did before? Do they have somebody willing to step in and make this investment if the bus companies refuse? I fear the answer is no. Practically speaking, the government is incapable of compelling them to invest. The government is holding no cards here.

The transport department’s paper suggests that there are a large number of unprofitable routes. So who pays for the bus companies to operate these routes? What is the magnitude of the losses incurred in serving these routes. How many Euro 5 buses could we buy if we didn’t have to fund these loss making routes? District councilors won’t allow the routes to be cut. The government wants to keep fares affordable, and thus the bus companies don’t generate sufficient cash from profits to pay for new buses. So the policy by default, is that we have a status quo of too many bus routes, low fares, and old polluting buses, because there isn’t money in the kitty to buy new ones and the government knows that it can’t push to bus companies to modernize given that, commercially speaking, it would be throwing good money after bad. In the background, the government implicitly chooses to tolerate old polluting buses as a necessary cost of having a cheap and plentiful bus service. So who pays for this cheap and plentiful service that the district councilors so dearly wish to defend…..we all pay the price in the form of breathing polluted air, dirtied by all our old busses across all the routes.  Cutting routes isn’t about emissions savings on a handful of routes. Its about building a vibrant and commercially viable bus industry that can recoup a huge investment in fleet replacement, and make some modest return on this investment. This is the forest.

From CAN’s recent meeting with the financial secretary we learned that the government will not write a check for new buses without the pain being shared elsewhere. By taking sides with the district councilors, CAN appears to be disregarding what seemed like a pretty firm position laid out by the the FS. The pain has to be shared by everybody, and there needs to be compromise. We can’t accept that district councilors will have sacred routes that can’t be cut, and we should push back against this sense of entitlement. We should also refuse to join the district councilors in vilifying the bus companies as profiteers. .

A pragmatic solution for funding new buses will likely require some mixture of route rationalization, fare increase, direct subsidy from the public purse, and additional, albeit subsidized, capital expenditure  by the bus companies. Convince the interested groups that the pain must be shared, work constructively and in partnership with the bus companies, and ask the government to pay for a slice, a bit like they did before when the compensated Hongkong Telecom for giving up their IDD franchise. This sounds to me like a recipe for success.

Hope these comments can influence your thought process and lobbying positions.

Best regards,

Fred Bowers

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