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     1 to 2 cents increase in bus fares and no increase in rail fares

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Fare adjustment formula caps fare increase rather than leave to operators to set

The Public Transport Council (PTC), in deciding whether to grant a fare increase this year, would look at the fare adjustment formula (Price Index -- 0.3%) which is 1.8% for 2007.


This fare adjustment formula protects the interests of commuters by capping the increase rather than leaving it to the operators to decide what the market can bear. Commuters also benefit via a productivity extraction (0.3%) where operators share their productivity gains with the commuters. This is also to encourage the operators to become more efficient in their operations if they want to maintain their profitability.


PTC checks on overall economic outlook, affordability and operators’ profitability


The PTC will have to take into account overall economic conditions, the affordability of public transport fares and the operators’ profitability when deciding whether or not to allow fare increases.


The current economic outlook is positive, with the full year GDP growth forecast for 2007 having been revised upwards to 7.0% - 8.0%. The unemployment rate has also come down to an estimated 2.4% in June 2007, the lowest in the last 5 years.


The PTC has assessed that there are no extenuating circumstances due to economic conditions or deterioration of affordability of fares to not grant a full fare increase. However, the PTC also did a “reality check” on the operators’ ROTA as an indicator of profitability to further ensure that commuters’ interests are protected. The PTOs’ ROTAs, compared with companies with similar industry structures and risk profiles, suggest that our rail industry has done very well in the last year. On balance, the PTC thus decided to raise only bus fares, and maintain rail fares at the current level, to the benefit of commuters.


Even with the fare increase granted on bus fares this year, fares are likely to stay affordable with a likely increase in general wage levels. The average wage growth was 5.5% for the 1st quarter of 2007. Affordability is also maintained by the fact that child/student fares and prices of concession passes will remain unchanged.





Comparison was made with the ROTA of companies such as Hong Kong’s Transport International Holdings and MTR, Stagecoach Group, Arriva PLC, FirstGroup PLC, SembCorp Industries and Singapore Airlines. The ROTA of these companies ranged from 4% to 9.7%.


Impact of fare increase on commuters


More than half of all trips do not see a fare increase. Those travelling by rail only, adult EZ-Link for some bus trips, paying cash fares on buses, children/students who pay concession fares and those with monthly concession passes (students and NS men) do not face fare increases.


Of the commuters affected by the fare increase, 3 in 5 of them take direct journeys. The Adult EZ-Link bus fares for such journeys will increase by at most 2 cents.


For Example: A bus journey from Toa Payoh Bus Interchange to Orchard Road that currently costs 87 cents will see a 2-cent increase from 1 October to 89 cents. This is an increase of 4 cents per day or less than a dollar (about $0.88) per month.


Among commuters who have to make one transfer to another trunk bus, they will see a fare increase of at most 4 cents.


For example: A bus journey from Ang Mo Kio to Alexandra Road with a transfer at MacRitchie Reservoir currently costs $1.581. From 1st October, the commuter will see an increase of 3 cents to $1.61 (a 2-cent increase for the 1st leg and a 1- cent increase for the 2nd leg). This is an increase of 6 cents per day or about $1.32 per month.


Comparison of average bus and rail fares across cities




1 This consists 65 cents for the 1st leg of the bus journey, $1.18 for the 2nd leg and a 25 cent transfer rebate.


2 The PPP is the rate of currency conversion at which a given amount of currency will purchase the same volume of goods and services in two countries. Another way of looking at the PPP is that when it is used as a currency converter, the price level is the same in both countries.


Annex A


Source: News Release 11 Sep 2007