The cost of transport and fare setting

Posted: January 10, 2014 in Transport
Tags: , , , , ,

Correction: A calculation error was made in the initial post. These errors have been corrected (original figures shown struckout). The graphs have also been corrected. While these figures still support bus plus train fare integration, given the similar cost per passenger km for those 2 modes, it does make achieving this appear more difficult given that there is no longer a small gap in the fare charged per passenger km for those same modes. Therefore, doing so remains the most likely outcome, but would now require a large (circa 50%) increase in train fares relative to bus fares.

Achieving multi-modal fare integration requires a journey to charge the same fare regardless of which or how many modes of transport were used to make it. Doing so would mean charging the same fare per km for different modes. While this is very easy for single mode integration (and is why Opal is allowing single mode fare integration), and relatively easy for bi-modal fare integration on buses and trains, the main obstacle appears to be ferries. One possible solution would be to exclude ferries from multi-modal fare integration.

A more detailed analysis of the figures behind this proposal is found below.

Click to enlarge. (Source: Transport Overview - Volume Eight 2013, NSW Auditor General, p. 38.)

Click to enlarge. (Source: Transport Overview – Volume Eight 2013, NSW Auditor General, p. 38.)

In 2013, trains were the mode of transport with the highest cost per trip: the average trip incurring operating costs of $13.07 to provide, of which $2.57 is paid for by way of fares. Ferries were the next most expensive: those figures being $8.49 and $2.77 respectively. Buses were the cheapest mode of transport: at $3.02 and $1.44 respectively.

NOTE: The figures above are for 2012 for ferries (as the franchising of Sydney Ferries means the 2013 figures are not comparable). Meanwhile, only government STA buses are included for the buses figure, these account for 71% of trips in NSW and serve the dense inner city parts of Sydney therefore cost less per trip than private bus operators due to the higher patronage levels. All following figures include both STA and private bus operators.

The trouble with these figures is that they do not take into account trip lengths. For example, the average train trip was 16.7km, while the average bus ferry trip was 8.9km and the average ferry bus trip is even shorter at 6.7km. So all other things equal, the average train trip would cost more to provide and should result in a higher fare than a bus ferry trip, the same again for buses ferries compared to ferries buses.

2014-01-15 Operating cost per km

Controlling for trip length provides the cost of providing transport for each mode by km. The relative cost of trains falls to reach parity with buses and ferries swap, while buses ferries remain the cheapest most expensive mode of transport per passenger km. Transporting a passenger 1km costs $1.27 $0.96 on a ferry, $0.79 on a train, and $0.59 $0.79 on a bus.

2014-01-15 Fares per km

Meanwhile, the long average trip lengths for trains means that passenger contributions to covering costs via fares drops substantially for trains, to the point that it falls below that of buses. The fare paid by passengers to travel 1km is $0.41 $0.31 on ferries, $0.17 $0.23 on buses, and $0.13 $0.15 on trains. This disparity is important if inter-modal fare integration is to be introduced, as fares for any given distance should be roughly equivalent between buses, trains, and ferries in order to achieve it.

This would allow passengers to be charged a similar fare for travelling the same distance, regardless of which or what combination of modes of transport they use. Opal will see transfer penalties within modes (e.g. bus to bus or ferry to ferry) eliminated, but not between modes.

2014-01-09 Farebox cost recovery per km

However, when looking at what proportion of operating costs are covered by fares, ferries recover only slightly more than buses, despite operating costs and fares being much more per km. As a percentage of total operating costs, farebox cost recovery for ferries is 32.6%, for buses is 28.7%, and for trains is 19.8%.

Ferry passengers pay almost two and a half one and a half times as much in fares to travel 1km than bus passengers ($0.41 vs $0.13 $0.31 vs $0.23), yet their contribution to operating costs is only slightly more (32.6% vs 28.7%). Meanwhile, ferry passengers pay over three times twice as much in fares to travel 1km than train passengers ($0.41 vs $0.13 $0.31 vs $0.15) yet their contribution to operating costs is only one and a half times as much (32.6% vs 19.8%). This is a very expensive way of achieving a similar cost recovery.

That is the main opposition within the transport bureaucracy to multi-modal integrated fares: ferries cost more to operate per km than buses and trains, so passengers should pay more per km to use them (and they do). So if fares are to be integrated, there are two ways of making ferry fares the same as for bus and train fares: (1) ferry fares can be cut, or (2) bus and train fares can be raised. It has to be one or both, it cannot be neither.

The former would cost the government in the form of foregone fares. This is because fares (for all modes of transport and for both public and private operators) are collected and retained by the government. It is particularly problematic given the fare cuts and freezes brought in as part of myZone and Opal, along with limiting fare increases to inflation since 2011, have already reduced potential fare revenue.

The latter would be unpopular, and the government seems reluctant to do this while it is rolling out Opal in the fear that it will be tarring what has otherwise been a fairly successful rollout. The last thing it needs is for the public to associate Opal with fare increases. But with farebox cost recovery falling as low as it is, particularly for trains, it would be unlikely that the government would not seriously consider this option in the coming years.

However, as the discrepancy in fares applies more to ferries than to buses and trains, where fares and are similar enough, one option would be to remove Opal’s transfer penalties between buses and trains, leading to integrated fares for passengers who take both trains and buses. This would require equivalising fares for both trains and buses (including the off-peak discount currently only applied to trains), then considering a journey made up of consecutive train and bus trips to be a continuous trip with a single origin and destination. This would then be used to calculate the fare. This is only possible under Opal’s fare system, as it has eliminated periodical train tickets and travel ten bus tickets which each complicate the fare calculation process.

2014-01-09 Fare by trip length

A quick look at the fares for all modes of transport shows that all fares other than those for ferries are actually quite similar at various trip distances. This would make fare integration for all non-ferry modes achievable without significant difficulty. It would also importantly allow for passengers in the catchment area of the North West Rail Link (NWRL) to not face a transfer penalty once the NWRL begins operating and they are required to catch a feeder bus before catching a train the rest of the way.

Note on figures used in this post:

Most figures were obtained from the Transport Overview – Volume Eight 2013, NSW Auditor General (pp. 31, 38) and Household Travel Survey 2010/11, Bureau of Transport Statistics (pp. 14, 39). All figures were for the year ended 30 June 2013, except for: (1) ferries where a shift to franchised operation made the 2013 figures not comparable and so 2012 figures were used, and (2) average trip lengths where the most recent figures available were for the year ending 30 June 2011 (average trip lengths for ferries were estimated with the available data).

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Comments
  1. Alex says:

    You raise an interesting point about the implications of the differing fare levels between ferries and the other modes for fare integration. However I suspect that Treasury would oppose even partial integration between bus and train fares because of the potential loss of revenue from the current flagfalls between these modes.

    It would be interesting to calculate the income from inter-modal flagfalls and (probably a much more complex task) to model the patronage effects from partially or completely removing these flagfalls and the extent to which these would offset the fall in flagfall revenue.

  2. Simon says:

    I say no to excluding ferries from fare integration. Do it once, do it properly. One of the reasons Sydney Ferry’s farebox recovery is so low is because they go out almost half empty in peak hour, or at least the Manly ferry does. Fare integration is needed to get a few more passengers on board from the wider catchment.

    What you could do is only charge for the most expensive mode. IPART wouldn’t like it, but they have no power to stop it just as they had no power to stop MyZone, which savaged farebox recovery.

    Other options are zonal; either radial or patchwork (eg ZVV). There’s surely more options that I can’t think of right now, but it seems that the most important thing to the government is not changing anything which might make someone lose out.

  3. @ Alex –

    The loss of fare revenue is definitely the obstacle here. Though that didn’t seem to stop Opal from providing fare integration for people taking 2 buses or 2 ferries consecutively.

    Perhaps the solution would be to take the hit of losing some of the flag fall initially, then recover it with increased fares in the future. My main argument was that there is no significant difference in the cost of transporting someone on a train vs a bus once distance is factored in, so that can’t be used as a reason to oppose bus/train fare integration.

    @ Simon –

    The recent history of fare integration in NSW has been baby steps rather than great leaps: private bus operators were brought into myMulti tickets as part of myZone in 2010, single mode fares were then integrated with Opal in 2013. Ferries only account for about 2.5% of public transport trips (though I’ll admit it’s possible that they have a higher share of multi-modal trips, but even then it won’t be much higher), so achieving multi-modal fare integration without them would represent a huge achievement, and would make bringing ferries into the fold later on much easier.

    It’s also not true that the government is avoiding changes that make people worse off. Occasional travelers, those who use monthly or longer periodicals, and those who travel off-peak but return in the afternoon peak will all be worse off under Opal. They seem to be trying to keep those who will be worse off to a minimum, but not avoiding it entirely.

  4. Simon says:

    It’s a history which is in need of changing.

    Fair point on monthlies & longer, although these people don’t lose out very much, and they no longer have to bother with actually buying the periodical nor risk not using it any more.

  5. Alex says:

    @Bambal,

    While I agree with Simon that moving to full integration would be the best option in principle, I also think that your proposal for a gradual approach might be more feasible.

    I also take your point that the Government has introduced intra-mode integration on buses and ferries, though they really had to do that or else Opal would have highlighted the glaring inconsistency between the treatment of bus passengers and train users, with the latter having had fare integration for years. Actually this process started prior to Opal with the MyMulti tickets which in effect also provide inter-modal integration.

    I can see a couple of political problems with not fully integrating ferry fares, however, apart from the general accusation of inconsistency. The first is that many ferry passengers are from Liberal voting areas (though this didn’t stop the government from jacking up the price for Manly ferry users). The second is that there is the potential for the lack of full integration to be linked to the fact that the ferries have been franchised, which in turn could raise further concerns (warranted or otherwise) about fares on a privately owned and operated NWRL.

    Incidentally on intermodal flagfalls I found this “gem” (pun intended) on the bottom of the Opal fare information page:

    “If you transfer between a bus, train, or ferry service, your Opal fare will be calculated separately for your train trip and your ferry trip. If your transfer is completed within 60 minutes, this is considered to be one journey for the purposes of the Weekly Travel Reward.”

    So we don’t have to be consistent if it doesn’t suit us!

  6. Lachlan says:

    Wouldn’t the introduction of integrated ticketing result in in an increase in usage of the network (especially of multi-modal trips), potentially offsetting the lost revenue?

  7. @ Lachlan –

    It depends on what sort of increase in demand it results in. If it leads to more people using existing services which are underutilised, then it could lead to higher fare revenue. But if it leads to more people trying to get on trains and buses which are already at capacity, leading to more trains and buses being put on, then the higher fare revenue will only recover part of the increased cost of providing those services.

    No one can predict which it will be, and even after the fact it’s hard to allocate the increase in demand due to fare integration vs other factors. That said, my gut feeling is that it can be done without an overall loss of fare revenue.

  8. TandemTrainRider says:

    @Bambul – Fantastic and very insightful post.

    A few points: ….

    – Rail’s cost recover ratios and costs per trip and groinf radically “improve” the next time any figures like these are released. That $13/trip includes *every* cost associated with rail in all of NSW: Interurban trains, CountryLink, the subsidy to keep the CRN (Country Rail Network) operating for grain farmers, Thirlmere Heritage Rail, maintaining Central Railway station as a historic building and even hidden subsidies for interstate freight rail.

    It will depend on the amount of inevitable cost shifting between NSWTrains and SydneyTrains, but the likely cost per trip of SydneyTrains will be in the $8-10 range from next year. (AFAIK perway maintenance outside the SydneyTrains zone will be worn by SydneyTrains).

    – Focusing on the headline fares for rail is probably a bit misleading, because the vast majority of fares are levided using a concession of one form or another

    – IMHO, the NSW DoT gives and unhealthy weight to cost per trip KPI, and this leads to anomolies in fare pricing. It’s in part driving the push for inter- and intra-modal interchanges because this means more trips per PAX km. Also, I think for all the modes the flagfall fares are too high, and the cost per km too low.

    – I think there are a lot of inequities and inconsistencies in how PT is priced in NSW, especially with rail. Many of these centre on the ability to police fare rules using paper tickets and manual inspection. I also think there are other issues too: such as the high time cost to PAX of switching modes because rail stations have highly restricted entry/exit points to all “efficient” manual revenue protection.

    Electronic ticketing has the potential to address a lot issues beyond just the inconsistencies between pricing of modes. I think the correct approach is to make as few changes as possible to the fare structures until OPAL is completely implented, then do a thorough review to enable all the benefits electronic ticketing has to offer, not just model consistency.

  9. qkwozz says:

    Assuming that ferry patronages are much much lower per day than bus and train patronages, how does the average fare per km look when weighted by the number of fares collected?

    I read that ferries are both insignificant in the broader scheme of things because of the low patronage, but entirely block fare integration due to being more costly per km. These seem contradictory…

  10. @ qkwozz –

    The figures in the post are per passenger km, so that’s already been taken into account. If I understand your question correctly, and I’m not entirely certain I do.

  11. Craig says:

    The average punter could not care less (nor should be expected to) about cost recovery per km for each mode. The travelling public just wants to get from A to B efficiently, safely and reasonably cheaply (compared to the private car), and the Opal card potentially offers a very user-friendly way of doing this.

    So, let’s make the fare system as simple as possible with seamless transitions from mode to mode. Anything less than this is a joke and a waste of the eye-popping amount spent on this new ticketing system.

    Meanwhile wrt to fare recovery, the Govt can then get on with reforms to work practices, productivity, networks, maintenance issues, privatisation, or whatever they need to do to get better value for the transport dollar.

    Is there not anyone in TNSW speaking up on behalf of the punters? Is there no-one powerful enough to tell NSW Treasury to get back in its box? By the way, it is worth checking out Frank Sartor’s (former NSW Planning Minister) memoirs, and the chapter devoted to how over the past few decades Treasury has placed its sticky fingers in all sorts of areas beyond its strict remit (and not always in a productive way either).

    I can only hope that behind the scenes there is serious thought being given to proper fare integration, otherwise they will pay a heavy political price as things like the East Subs light rail and NW Rail are rolled out.

  12. qkwozz says:

    I don’t think you understood what I meant, and will explain more with a ludicrously blown-out example. The figures you have quote are explicitly “Net cost per passenger journey”, without taking into account the total number of journeys taken in each mode of transport.

    Say 1km fare on a ferry costs $1000, and 1km on a train costs $1. (The example is very exaggerated, but akin to the data you have provided). If we were to say these fares should be integrated, it looks like a train trip will rise $500, and the ferry passengers get $500 off their ticket, which is a good reason to not integrate.

    But if the number of kms travelled on each mode is taken into account, the picture might look different. Say, for example, 1 person takes the ferry 1km, and 1000 people each take a train 1km. Total fare is $2000 for both of the ferry and train, but for 1001km, which would result in a net fare of ~$2 per km across the entire network. This is a much more acceptable increase in fare price to the first calculation for train passengers (500 vs 2), and averages out to the same net cost overall.

    My question was, essentially, what is the number of journeys for the train, bus and ferry (per year, or whatever), and when we take “net cost per passenger journey for ferries” x “number of ferry journeys” + [ditto train, bus] / total public transport journeys, how does the average cost per passenger journey (mode independent) compare?

    Unless of course I’m missing something, and I’m sure there’s added complexity in the non-linear utilisations at different ranges for each mode, but the argument that “ferries are too expensive” and “ferries are insignificant in passenger volumes” makes no sense to me

  13. qkwozz says:

    Further, I’ll take the figures from the data you referred to in the article.

    Page 32 of the auditor general’s report you cite states 3% of passenger journeys were by ferry, 97% by bus or train. Take a rough average of the cost per journey by train and bus to $5, and the $10.50 cost per ferry journey, and plug into the formula i gave: {[(3 x 10.50) + (97 x 5)] / 100} = $5.16, which is a 3% rise from the original $5 i estimated for the train + bus crowd.

  14. @qkwozz –

    I think I see what you’re trying to say. Ferry trips do account for a small proportion of all public transport trips (around 2.5%-3%), and also a small proportion of all public transport operating costs ($125m compared to $1.2bn for buses and $4.1bn for trains). So the additional cost of in terms of potential lost fare revenue from ferries, even though potentially high in terms of fares received for ferry travel, is quite small in terms of fare revenue for all public transport.

    It’s certainly a convincing argument when put in that context.

  15. OC says:

    A cursory look at bus capacity utilisation on routes connecting outer suburban regions and train stations in the peak shows why fare integration between buses and trains needs to happen immediately. Simply put they are empty because they represent shocking value for money due to the flag fall penalty. As an example to get to my closest station costs $3.70 (despite being just over 3km away) given it covers 3sections. The train to the city is $5.20 for a bit under 35km. I’ve never seen the bus pull up to the station with more than 3 paying passengers. People either drive or get dropped off at the station. The simple solution would be to charge the same $/km on the incremental bus trip as the train trip. The lost revenue would be miniscule as the current service has miserably low utilisation. One would think it would also lift train patronage outside of the peak as at the moment parking fills very early so many just drive to their destination.

    As to ferries I think the cost per km argument is a massive furphy for the simple reason that it ignores the cost of the upfront investment in the road and rail capacity that buses and trains use. Ferries on the other hand use a harbour that would otherwise be empty! I’d be pretty confidant that when the cost of capacity is considered ferries actually have similar or lower all in costs than buses and trains.

  16. ianh2014 says:

    Further to TandemTrainRider’s comments – note that some “cost” figures in the auditor generals report appear to include significant capital items. Depending on what you are trying to show (and how you want to define things) you may need to account for these – for example the chart labelled “operating cost per km” and references to operating cost in the text may be misleading.

    The high fixed cost associated with passenger rail services relative to other modes in part explains the differences in the proportion allocated between flagfall and the per-km cost of fares.

  17. QPP says:

    I’d missed this before

    Totally agree with OC. I think if you sort out the multi-modal/flagfall issues you can increase patronage quite significantly, and thereby collect more revenue

    On a personal level, I live around 2.5km from a station (on the North Shore Line). There is a bus that connects to the station in morning and evening peak which I could take, it gets me there in about 7 minutes. Or I could walk in 25.

    I almost never take the bus. I can’t be bothered with the hassle of having the right change, the cost is disproportionate to the very reasonable train cost, and my journeys by PT aren’t frequent enough (usually I cycle, PT is about once a week on average) to have a 10-pack of bus tickets in my pocket. Looking at your figures above, I’d be happy (in fact more than happy) to pay an add-on of 50c or more for this journey, nice and easy with a tap-on tap-off system, it’s the flag fall that kills it as the ticket price is $3.70…. versus the.train ticket to take me 10k to work which is $3.80

    I would even go so far as to say I would take more train journeys if this was sorted out. On occasion if time is short, I just drive. Some of those journeys, a more accessible multi-modal transfer would definitely see me using PT.

    I realise it’s not all about me, but I’m not alone – people in my street either get dropped at the station or drive the whole way, and I’ve heard a number of comments about the perceived unfairly high bus fares. None of these PT services is at capacity, the trains have space at the time I travel and the bus is always virtually empty (last time I used it, for a bus leaving the station at 6.15pm, I was the only person on it…..)

    In this city we have a relatively small number of rail lines with a big spacing between them, and a lot of sprawling suburbs in between those rail lines. For areas completely without rail (eg Northern beaches) then it’s a different matter, but for the rest of us the least we should do is promote the collection of passengers from suburbs by bus to train to make PT as attractive as possible.

    In some other places I’ve lived this sort of integration works so well it becomes the norm, with patronage boosted (sensible off peak pricing also helps) to boost fare revenue. Stockholm springs instantly to mind. On a smaller scale it has a lot of similarities with Sydney – sprawling suburbs over a large area, limited heavy rail and metro lines into the centre. From the suburb we lived in Stockholm, a similar distance from the CBD and a similar distance from the railway, we *always* caught the railbus to the station, because it was a modest add-on fare and it connected with the trains so it became (crucially) just less hassle than driving. Everyone did the same, with decent patronage even in the middle of the day. Even though the roads were quieter and the parking easier and cheaper than here it was the default choice, just because it was easier. That’s the key thing – you have to make it easy for people.

    TfNSW’s catchphrase is “the customer is at the centre of everything we do”. Please then, walk the talk and make multi-modal journeys easy, otherwise a cynic would say it appears to be Treasury who are really at the centre of everything you do….

  18. Alex says:

    Totally agree with QPP on this (see earlier posts). Removing the inter-modal flag fall is certain to increase patronage and not doing so is likely to be counter-productive in planning and expenditure terms.

    As well as being a Treasury-inspired rip-off, the flag fall charges introduce a strong element of inequity into the system and as a result encourages travel patterns that are counter-productive for both the individual and the transport system. If I live say 10km from my destination and I have a choice of one mode to get there (say a bus) or two modes (bus and train), why should a pay a second flag fall for the latter journey and not even get the benefit of two trips being recorded on an Opal card?

    I’m much more likely to stay with the single mode which may be slower and which may contribute more to congestion, especially if my destination is the CBD, by bringing additional buses into the city (or contribute to congestion even more by giving up on PT and driving all the way). If there was no flag fall I would be much more likely, as QPP says, to use a feeder bus to the nearest station, thus reducing congestion and contributing to the development of a proper feeder bus network.

    It seems we are taking faltering steps to developing the sort of combination of rapid limited-stop trunk services fed by local all-stops routes and supported by good interchanges advocated by Jarrett Walker and others. However this is being done only within each mode, train on one hand and bus (probably bus/tram) on the other. It seems bizarre that we want to continue to perpetuate an inconsistent fare structure which discourages inter-model transfers which do exactly the same thing.

  19. What percentage of a an Opal fare is administration costs? Please factor in installation and fixed costs if you can. If it is about half then it reinforces the push for free PT.

    Bear in mind that MyKi in Melbourne was so expensive to install that it could have paid for 500 conductors on $50k salaries for 52 years.

  20. @Pat Luvall (Mysta Squiggle) –

    Opal cost $1,200m and that covers installation plus 15 years of operation[1]. That’s about $80m per year. Total fare revenue in 2013 for trains, buses, and ferries was $1,195m[2]. So even assuming neither fares increase nor patronage increases (and excluding light rail fares, which the government noa also collects), that represents 6.7% of fare revenue.

    So definitely not enough to strongly argue for free public transport.

    [1]: http://www.smh.com.au/nsw/train-timetable-change-produces-onethousand-per-cent-increase-in-complaints-20141118-11p20h.html

    [2]: http://www.audit.nsw.gov.au/ArticleDocuments/291/05_Volume_Eight_2013_Transport_Overview2.pdf.aspx?Embed=Y

  21. Ride2Wk says:

    Did anyone consider that buses run on the road network that are paid for in other budgets and have hidden extra costs? Buses cause road wear & tear, add congestion (esp. bus stops) and are involved in crashes that are mostly not paid for by the bus budget. If you took those external costs into account wouldn’t buses be much more expensive? Ferries mostly don’t cause such costs & certainly don’t contribute to road congestion.
    One other point that isn’t mentioned when people talk about how much public transport is subsidised, car usage is also heavily subsidised. Rego and fuel excise does NOT pay for most roads and it certainly doesn’t cover the many hidden costs of car usage. In 2006, Queensland Transport said that every car trip replaced with a bike trip saved the community $0.60 in road and hidden costs like health costs. Turn that the other way around and basically car usage costs government $0.60 in 2006, say double that now almost 10 years later and it makes PT look relatively cheap.
    As people like QPP said already, you have to make the system as simply as possible and only then will people bother using it and leave the car at home. Currently it’s too easy to just take the car and be ignorant of the real costs to society.

  22. Woody says:

    It seems to me that comparing trips by distance (travelled? moved?) does not take into account the ferries’ advantage of operating on water – they are able to take a much more direct path that bus and train.
    Possibly it would be fairer to compare the walking distance rather than distance travelled?

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