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Old August 3rd, 2012, 07:40 PM   #2201
saiho
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Quote:
Originally Posted by drunkenmunkey888 View Post
What Shanghai needs is a good commuter rail system for the outlying districts and Jiangsu/Zhejiang suburbs. Commuter rail can be adjusted much more easily to accommodate ridership differences between peak hour/weekends and have set schedules so that there is no ambiguity about when the next train is coming. They can accommodate greater seating as well. Shanghai is simply too big to have just one massive rail system with only metro specifications.
couldn't agree more. Though the winds of change is coming line 21 and 16 are more commuter-like with transverse seating and express services. though I am still wondering what the rolling stock will look like.

Quote:
Originally Posted by drunkenmunkey888 View Post
BTW HK MTR is profitable because they engage in real estate development. It would be interesting to see if only the metro operation segment is profitable although I highly doubt it.
http://en.wikipedia.org/wiki/Farebox_recovery_ratio

look at HK @ 149% so basically for every 1 dollar of fare MTR profits 49 cents pile on real estate, consultancy, BTO, and operation services and thats the profit you commonly see get posted.

Last edited by saiho; August 3rd, 2012 at 07:41 PM. Reason: grammer
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Old August 3rd, 2012, 07:40 PM   #2202
George08
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Very interesting discussion...

How many years the HK MTR took to become profitable?

Thanks

"There are two positive externalities that justify subsidizing subways: the reduction in traffic and pollution"


I agree.
The idea of the same traffic jams -we got in the West- in China, with
over 700 mln motor vehicles is terrible.

I'd like to see the Japanese, Korean, Taiwanese Hk rapid transit model
in China.
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Old August 3rd, 2012, 07:54 PM   #2203
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Quote:
Originally Posted by saiho View Post
couldn't agree more. Though the winds of change is coming line 21 and 16 are more commuter-like with transverse seating and express services. though I am still wondering what the rolling stock will look like.

Don't forget the Jinshan Railway, which leaves from Shanghai Southern Station and is a full-on suburban rail.
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Old August 3rd, 2012, 08:04 PM   #2204
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oh snap, by line 21 I mean line 22 or the Jinshan railway and I also forgot about line 19.
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Old August 3rd, 2012, 10:28 PM   #2205
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I just looked back at CRH6's interior shots, there are handles on the isle seats, maybe that's indication that they will allow a significant number of standing passengers, which means there is a change that it could be used on newly constructed commuter/suburban rails.
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Old August 4th, 2012, 02:52 AM   #2206
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Quote:
Originally Posted by saiho View Post
Hong Kong, Taipei, Osaka, Singapore, Tokyo and Delhi are the only metros that make a profit.
All the cities here except Delhi I don't think gonna cut it. These cities demand a much higher ticket price. I don't know about dehli, but I would guess they're not too far from the Chinese price.
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Old August 4th, 2012, 10:53 AM   #2207
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Delhi metro is operationally profitable even from ticket sales alone. In FY 2010-11, Delhi metro incurred expenditure of INR 4.9 billion on traffic operations and earned a revenue of INR 9.4 billion on the same.

Ticket prices in Delhi metro range from INR 8 to 30 (USD 0.16 to 0.60) on all lines except the Airport Express line (INR 20 to 80 or USD 0.4 to 1.6)

Delhi Metro additionally earned a revenue of INR 6.8 billion from advertising, property development, consultancy services to other metros and external project works. Expenditure in this head was INR 3.5 billion.

Overall the operational revenue vs operational expenditure was 192:100 (INR 16.1 billion vs INR 8.4 billion).

However, the net profit after interest, depreciation, tax, etc, as expected, was negative at INR -4.1 billion.
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Old August 4th, 2012, 11:18 AM   #2208
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Net Income

"However, the net profit after interest, depreciation, tax, etc, as expected, was negative at INR -4.1 billion"

So, finally, we're speaking (also in this case) about losses???
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Old August 4th, 2012, 11:33 AM   #2209
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Quote:
Originally Posted by George08 View Post
"However, the net profit after interest, depreciation, tax, etc, as expected, was negative at INR -4.1 billion"

So, finally, we're speaking (also in this case) about losses???
Yes. Metros cannot earn net profits because of huge capital expenditure. Most of the metros cannot even recover their daily expenses (operational expenses). Only the metros described by Saiho (Hong Kong, Taipei, Osaka, Singapore, Tokyo and Delhi) are able to recover at least their operational expenses, that is, they are operationally profitable.

However, it is not just about financial benefits. There are far more economic and social benefits because of metros which go unaccounted, such as, time saving, less pollution, less accidents on roads, less fuel consumption, job creation, etc. All the metros in this world be economically profitable, I believe.
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Old August 4th, 2012, 07:38 PM   #2210
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The article is a bit of the odd sheep out. Though not the first one, 2 years ago I saw an article that struck a similar vein comparing subway construction it to blind expansionism akin to "The Great Leap Forward". As usual it talks about operational losses and "low ridership" (apparently, idk what he is smoking). They really don't have much reasons to not build mass transit.

Quote:
Originally Posted by Abhishek901 View Post
However, it is not just about financial benefits. There are far more economic and social benefits because of metros which go unaccounted, such as, time saving, less pollution, less accidents on roads, less fuel consumption, job creation, etc. All the metros in this world be economically profitable, I believe.
Luckily local governments think so too, though I would not be surprised of there is also other ulterior motives. mass transit is still mass transit.

Last edited by saiho; November 30th, 2012 at 12:48 AM. Reason: grammer
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Old August 5th, 2012, 08:15 AM   #2211
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Quote:
Yes. Metros cannot earn net profits because of huge capital expenditure. Most of the metros cannot even recover their daily expenses (operational expenses). Only the metros described by Saiho (Hong Kong, Taipei, Osaka, Singapore, Tokyo and Delhi) are able to recover at least their operational expenses, that is, they are operationally profitable.

However, it is not just about financial benefits. There are far more economic and social benefits because of metros which go unaccounted, such as, time saving, less pollution, less accidents on roads, less fuel consumption, job creation, etc. All the metros in this world be economically profitable, I believe.
How many metros are being operated to maximize profits? In other words, are ticket prices set in order to maximize revenue, or to maximize ridership? I think the elasticity of demand for metros is quite inelastic, meaning if metros raise ticket prices they will not see a large decrease in ridership. I base this on the fact that the NYC subway raised its ticket prices several times between 2008-2011 and successfully closed its budget gaps each time.

The demand for subways is inelastic because it would be a huge change in lifestyle for most riders to abandon the subway. The bus is one option, albeit a very slow one. Neither a car or motorcycle is an option for most riders. And subways have a natural monopoly.

Subways should at least be breaking even on operating costs/expenses.
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Old August 5th, 2012, 08:40 AM   #2212
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But the governments have to be populist too to get elected next time.
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Old August 5th, 2012, 03:20 PM   #2213
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..

Last edited by Geography; August 5th, 2012 at 03:44 PM.
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Old August 5th, 2012, 04:23 PM   #2214
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Quote:
Originally Posted by Geography View Post
How many metros are being operated to maximize profits? In other words, are ticket prices set in order to maximize revenue, or to maximize ridership? I think the elasticity of demand for metros is quite inelastic, meaning if metros raise ticket prices they will not see a large decrease in ridership. I base this on the fact that the NYC subway raised its ticket prices several times between 2008-2011 and successfully closed its budget gaps each time.

The demand for subways is inelastic because it would be a huge change in lifestyle for most riders to abandon the subway. The bus is one option, albeit a very slow one. Neither a car or motorcycle is an option for most riders. And subways have a natural monopoly.

Subways should at least be breaking even on operating costs/expenses.
because they are most are government owned and funded there is no incentive to maximize profits. Also nowadays metros are built strictly for the external benefits (less pollution and congestion). New York is has a more inelastic mas transit demand curve more in line with large European and Asian cities because of lifestyle. But say Atlanta, or LA raised its fares everyone would not take it. China's demand curve today is kinda elastic as the rising middle class has to make the choice between a car or a train lifestyle . If you don't get them hooked today, your going to have a harder time doing it tomorrow.
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Old August 5th, 2012, 04:46 PM   #2215
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I think the biggest thing we're leaving out is the amount of money it takes to build these systems...I think a big reason why HK's system is doing well is because they have utilized a different financing scheme.

If it costs $800 million dollars to build X line, then you may end up owing $1.2 billion, and you maximize your ridership at a base fare of $3...you can see the problem. (these numbers are completely random, but I was just trying to illustrate my point
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Old August 5th, 2012, 05:09 PM   #2216
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Quote:
If it costs $800 million dollars to build X line, then you may end up owing $1.2 billion, and you maximize your ridership at a base fare of $3...you can see the problem. (these numbers are completely random, but I was just trying to illustrate my point
Follow through. If you assume ridership of 1 million per day, in line with medium-sized metros like those of Shenzhen and Guangzhou, that's $3 million per day in revenue. Then you can add all the advertising revenue from the trains and stations. Let's estimate at $1 million per day. I would be shocked if operating costs were $4 million per day, especially in developing countries with lower labor costs. Cities with unionized work forces might consume all their daily revenue.

At $4 million/day in revenue and 365 days in a year, that's $1.46 billion/year in revenue. If we assume operating costs consume 90% of that, over $1 billion/year, then that still makes a profit of $146 million. If the interest on $1 billion in bonds is 5%, then that's $50 in annual interest payments, leaving a net profit of $100 million.

I know, this is all very rough and I'm not an accounting or finance expect, but on the face of it, it looks plausible. The Beijing subway provides 7.5 million rides a day, in one of the richest cities in China. There is a flat fare of just 2 RMB (according to Wikipedia), about $0.30!! If China raised that to $1/ride, that's $7.5 million/day, plus advertising revenue. Surely the Beijing subway's daily operating costs are less than $7.5 million.
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Old August 6th, 2012, 07:17 PM   #2217
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Quote:
The Beijing subway provides 7.5 million rides a day, in one of the richest cities in China. There is a flat fare of just 2 RMB (according to Wikipedia), about $0.30!! If China raised that to $1/ride, that's $7.5 million/day, plus advertising revenue. Surely the Beijing subway's daily operating costs are less than $7.5 million
If they will increase the fare to 1usd, then do u think that ridership will remains the same, it will definately not remain that reliable, metros are such a hits because they provides fast and reliable travel in very affordable fares for any class people, if u'll increase the fare that much, it will remain out of reach for many middle and lower middle class people, even rich people will prefer taking thier cars out instead of travelling in metros, metros are made for convinience of public and not to make profits, govt. have many other sources to do that, but if instead of that some systems(4-5 out of about 150-160systems) are making profit,then that's very nice. but nobody plans metro to make profits.
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Old August 6th, 2012, 11:53 PM   #2218
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I think the Chinese should try seriously to make
the most important metro systems in their country
at least "operationally profitable".
Beacause a country with over 1 bln people
has got a very big potential ridership..
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Old August 6th, 2012, 11:59 PM   #2219
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Why do they have to seek profitability? It's a public service and is there to facilitate the economic growth of the city. It's like saying public education is not profitable so let's increase tuition in public K-12 schools.
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Old August 7th, 2012, 04:56 AM   #2220
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The logic should be planners should design cities that are sustainable, and transit use should be one major part of sustainability.

Once the system is sustainable, then it will not lose money.
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