Changes in Hong Kong rail fares unfair? Where’ve you been living?
Pressure has been mounting for the city’s sole railway operator to review the [fare adjustment] mechanism, which has been widely criticised as unfair and as safeguarding the listed company’s profits rather than the interests of the community.
SCMP, March 30
Here is a factoid for you. To ride the London Underground from Piccadilly Circus to Leicester Square, one single stop, a trip you could do as fast on foot, will cost you £4.90, or HK$54.20 at current exchange rates.
To ride our Mass Transit Railway from Chai Wan to Tuen Mun, from the furthest southeast point of the network to the furthest northwest, a journey that will take you well over an hour to complete, costs HK$36.50.
Yes, that’s right. The longest trip you can make on the MTR still costs a third less than the lowest fare for a single short hop on the London tube.
Of course, if you are a regular commuter in London you might use the Oyster card. In that case, the one stop hop will cost you sterling £2.40 (HK$26.50). This is slightly less than HK$27.40 Octopus fare from Chai Wan all the way to Tuen Mun. I cannot deny it. Big win for the tube.
Here is another factoid for you. MTR profits before interest and tax from Hong Kong transport operations last year, the commuter rail business in other words, came to HK$2.49 billion.
Meanwhile, the corporation made more than HK$10 billion from station commercial operations and from property development plus property investment. There is a reason why I say that MTRC stands for Modern Town Redevelopment Company.
Now take out the roughly proportional share of interest costs and tax. This leaves you with an after-tax contribution from passengers of about HK$1.9 billion, which stands against shareholders’ funds of about HK$172 billion.
Thus the profits made from supposedly “safeguarding the listed company’s profits rather than the interests of the community” amount to barely a 1 per cent return on total equity. And they call this unfair to commuters?
But then I have never met any independent MTR shareholder. I wonder sometimes whether that free float of 25 per cent of the shares really exists, or whether it has in fact all been squirrelled away under false names in some government drawer.
What real investor would ever care to own this clunker? For starters, it has been made an open till for the government to rob. That horrendously expensive money loser, the Airport Express, went into it, for instance, instead of being treated as an airport project, which it obviously was and is.
But lumping the Airport Express in with the airport would have forced the airport to charge higher landing fees to meet its own financial targets. Cathay Pacific would not have been pleased. Hotelkeepers might have objected. Can’t have that. Let’s stuff it into our favourite stuffee, instead.
And then we have that ridiculous high-speed railway to the border, which no one wanted but was foisted on us by Beijing bureaucrats. Last seen, the bill had risen to HK$84 billion because it was too much of a rush job for anyone to do proper engineering studies. Next stop, HK$100 billion. Soon.
As an investment, the thing hasn’t got a chance. We shall have fare revenues defraying the subsidy rather than the subsidy the fare revenues. The prospect had government collectively scratching its head. Where shall we discard this stinker?
Yes, hmmmm..., tough question. Let’s see. Ahhh, I have it. Here’s a novel idea for you, very novel. What about the MTR?
And now a fare adjustment mechanism that was meant to keep fares permanently down has unexpectedly permitted a tiny 2.7 per cent increase. The entire grassroots caucus of the Legislative Council is consequently up in arms to protest this “unacceptable” turn of events.
“MTR Corp shouldn’t maximise its profits without regard to public interests,” says legislator Ben Chan Han-pan of that ultra thin return on capital from passenger fares.
Maximised profits, you see. Ordinary people just simply cannot bear these fares that Londoners would slaver to enjoy.
Here is the truth of it. I happen to live on the third planet in orbit around a minor star in the Orion Arm of the Milky Way galaxy. Where some of these legislators come from I haven’t a clue.