I am responding to the article 'All aboard the merger express' (October 15), by Albert Cheng King-hon.
Mr Cheng said the Kowloon-Canton Railway Corporation's net profit last year lagged far behind that of the MTR Corporation. Railway companies all over the world rarely make a profit just by operating a train service. In Hong Kong, these two companies adopt the rail-cum-property model. The MTR Corporation has all along been developing railway projects in parallel with property on its lines. Last year, it reaped a huge profit because of property; the KCRC's profit has come almost solely from rail.
New railways are built to last 50 years. It takes time for patronage to build up. But with a new line, the fixed operating costs, depreciation and interest charges begin to kick in. The financial position will not be rosy until patronage reaches break-even. The railway then enters its harvest years. West Rail is no different, I can say confidently: its patronage has risen from under 100,000 trips a day at the start 22 months ago to 190,000 now.
Mr Cheng also attributed the KCRC's recent spate of incidents to its adoption of a new signalling system for West Rail 'without stringent tests'. This is absolutely incorrect. Countless test runs were conducted before West Rail's opening. A 100 per cent score was achieved in safety, while punctuality reached 99 per cent. Despite teething problems in its first year, West Rail achieved 99.5 per cent in punctuality, which has continued to improve, reaching an average of 99.7 per cent - one of the world's highest rates. But of 400 trips per day, there will still be 0.3 per cent, or about one trip, with a three-minute delay. This may still fall short of public expectation. But railway operators everywhere recognise that incidents are inevitable. Especially early on, a lot of fine-tuning has to be done before a new railway can run smoothly.
I was surprised that Mr Cheng considers that KCRC management has a bureaucratic culture. In recent years, the company culture has indeed seen some changes. The KCRC has become more open and transparent. It has become more proactive in communicating with the public on policies, issues and incidents. An example is the reporting mechanism for incidents. In December 2003, the KCRC began reporting to the public all incidents causing a delay of more than eight minutes - previously, the delay had to last 20 minutes. It always investigates such delays and looks for areas for improvement. But this activity created the impression that incidents occur frequently on West Rail. If the old reporting system had stayed in place, the number of incidents on West Rail would have been similar to East Rail's.
The KCRC has shifted significantly towards a performance-based culture. Last year, a variable pay scheme was implemented for the top three tiers of management. Sixteen objectives based on safety and reliability, financial and operational performance, and customer satisfaction measure staff performance. In the pay review, an employee's rise is determined by his or her performance.