“Why are only profits from its property development business included? In the coming few years, I am sure that there will be a slump, with the high interest rates. No one will bid on the land they have now,” he told a radio programme.

“Last year, the company earned HK$7 billion, but it is not reducing its fares because its property development business profits were only HK$2 billion. Other profits came from advertisements and rent.”

The MTR Corp raised eyebrows on Tuesday when it announced fares would be raised by a maximum of 3.09 per cent in June, the second increase since the government imposed the formula last year.

The mechanism is set to be used for five financial years, or until the 2027-28 cycle.

“It is the city’s railway monopoly and [the company] has been snatching customers from bus operators,” said Tien, who is a former chairman of the Kowloon-Canton Railway Corporation, which merged with the MTR Corp in 2007.

“Every time a new rail line is opened, more people will take the MTR and more customers will be snatched from the bus operators, which will further increase the advertising profits. The stations can also be rented out to different shops.”

Hong Kong MTR passengers face fare rises of 3% in June

He said he believed the company’s non-property development profits would continue to increase in the coming five years.

Under the fare agreement renewed last year between the MTR Corp and the government, its majority shareholder, the formula incorporates the composite consumer price index and the nominal wage index for the transport sector recorded in December of the previous year.

The productivity factor – which is set between 0.6 and 0.8 percentage points, depending on the level of profits – is subtracted from the total of the two index rates. The lower figure applies if the firm makes less than HK$5 billion in property development profits in the previous year and the higher one is used when the gains surpass HK$10 billion.

This year’s productivity factor was set at 0.6 percentage points as the MTR Corp earned profits of HK$2.08 billion from property development last year, among HK$7.78 billion in overall gains.

Tien said he believed the company was unlikely to earn more than HK$5 billion in property development in the next five years, keeping the reduction at the lowest end of the scale.

The factors this year would have resulted in a fare rise of 3.2 per cent. Along with a 1.85 percentage point increase deferred from last year, the total adjustment would have reached 5.05 per cent.

But under the fare adjustment mechanism, the increase has been capped as it cannot exceed the year-on-year change in a general household’s median monthly income, which was 3.09 per cent in the fourth quarter of 2023, according to official data.

The rail giant said on Wednesday that it had been mindful of the operating environment, societal and economic conditions as well as long-term financial sustainability.

It also considered efforts to provide fare concessions and to give back to the community, the firm said.

“This includes continuing to offer regular fare concessions to various passenger groups such as senior citizens, children, eligible students and people with disabilities. In the past year, the total value of these concessions amounted to over HK$2.9 billion,” a spokesman said.

Legislator Gary Zhang Xinyu, an engineer who previously served as operations manager at the rail giant, also agreed this year’s fare rise did not pass on the profits earned by the railway operator to the public.

“The revenue or profit of MTR comes from tickets, service revenue, rentals from station shopping centres, shops and offices, overseas investments and so on, which constitute the entire basic business of the firm,” he told the same radio show.

“If we look at this year as an example, its underlying business profit amounted to more than HK$6 billion, which is much better than the performance of its underlying business last year, especially the performance of its recurrent business.

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“Under such circumstances, if the HK$5 billion [in productivity factor] is based on the underlying business, there is already an additional deduction in the fare rise this year.”

He said the threshold of the productivity factor was “too high”.

“In the past 10 years, when our property markets were very prosperous, the property development business profits only surpassed HK$5 billion in three years, with the average profits being about HK$4 billion each year,” he said.

“If we design a formula with a threshold that even the average profits cannot trigger the subtraction, where is the logic in it?”

Additional reporting by Oscar Liu