Hong Kong MTR

Hong Kong MTR fares set to rise by 3.14 per cent 

The increase is based on a controversial fare adjustment mechanism and follows a freeze last year

PUBLISHED : Tuesday, 27 March, 2018, 4:57pm
UPDATED : Monday, 28 May, 2018, 9:25pm

Hong Kong’s profitmaking railway operator is set to raise ticket prices by 3.14 per cent this summer, prompting renewed calls for an overhaul of its controversial fare adjustment mechanism. 

With government data paving the way for the MTR Corporation to raise fares under the mechanism,  the coming increase will take effect in June. 

The MTR Corp froze fares last year as it recorded a 64 per cent rise in net profit to HK$16.8 billion (US$2.14 billion), while the government announced an annual wage rise for transport workers of 2.8 per cent in December. 

The latest increase was calculated from half of the yearly change in the inflation rate in December, which was 1.7 per cent, plus half of the yearly increase in wages for the transport sector. A productivity factor – 0.6 of a percentage point – was deducted. 

Including last year’s 1.49 per cent rate of adjustment, which was rolled over, the coming MTR fare rise would be 3.14 per cent.

Hong Kong’s newest export? MTR looks to sell trains and property business model

Under the price-setting mechanism renewed in 2017, rail fares were frozen last year as the adjustment rate was below the required 1.5 per cent threshold needed to trigger an increase. The freeze followed seven straight years of fare increases – amounting to a rise of more than 20 per cent since 2010.

However, the railway operator will continue to offer some sweeteners to passengers, including a 3 per cent rebate on fares for every Octopus trip for at least six months this year, worth more than HK$220 million.

With the 3 per cent rebate, it is likely that Octopus users will have no effective or actual fare increase in the 2018 calendar year
Jeny Yeung, MTR

“We have rolled out a number of initiatives benefiting customers … including the commitment to provide a 3 per cent rebate for all Octopus users for at least six months each year until 2022-23,” MTR commercial director Jeny Yeung said. “With the 3 per cent rebate, it is likely that Octopus users will have no effective or actual fare increase in the 2018 calendar year.”

She added the company would continue to provide ongoing fare concessions – amounting to some HK$2.6 billion per year – to benefit different groups, including children, students and the elderly.

But the MTR Corp’s critics were not buying it.

Lawmaker and former railway boss Michael Tien Puk-sun said the company should incorporate the rate of rebate into the fare-setting formula so as to contain the actual ticket price increase.

“Then every year the fare rise will be contained to a low level, which will be more acceptable to the public,” Tien said. “If it continues to stick to this formula the accumulated fare rise would be staggering over a long period of time and impose a bigger burden on the public.” 

Lawmaker Michael Luk Chung-hung, of the pro-establishment Hong Kong Federation of Trade Unions, called for a revamp of the fare-setting formula with more concessions, complaining that the existing mechanism had failed to meet public expectations.

“We hope the MTR can add new elements to the formula to make fare prices more reasonable,” Luk said. “For example, as it reaps a lucrative profit every year, we propose that the fare-setting formula should take into account the MTR’s profitability.”

He also urged the railway operator to introduce more fare concessions such as a monthly pass for students and revive an older concession that offered a free trip for every 10 rides.

However, MTR Corp chairman Frederick Ma Si-hang insisted the six-month rebate of 3 per cent could offset the impact of the coming fare rise.

How MTR fares are adjusted and why they upset Hongkongers

“I think this fare rise is reasonable to the public,” he said.

As for calls for profits to be shared with the public by reducing fares, Ma pointed out that since the government held a 75 per cent stake in the MTR Corp, the company would have to pay dividends to its majority shareholder. The firm also needed to use the profits to invest in new hardware and sustain its operation in the long-run, he added. 

“We need to make use of our profits to maintain our operation such as purchasing new train fleets, paying maintenance fees and replacing the old signalling system. I hope the public will understand our operational needs,” he said.