For public transport to keep running, operators must find ways to outlast coronavirus

How long can the public transport sector keep running with so few commuters?

How long will public transport last?

Yale Z Wong, University of Sydney

Minimising health risks has rightly been the focus of discussion during the coronavirus outbreak. This includes efforts to protect both frontline public transport employees and the travelling public. But we should also be concerned about the strategic, financial consequences for transport operators and their workforces.

We have already seen the struggles of the aviation industry. The COVID-19 pandemic also has major financial implications for the public transport sector. While it has been declared an essential service, fears about coronavirus, widespread work-from-home directives, cancellations of major events and potential city-wide lockdowns will result in massive drops in patronage.

Railways are a high fixed-cost industry (like airlines) and are particularly vulnerable to demand volatility.

The Chinese experience has been that people preferred to use private cars and services like taxis and ride hailing rather than public transport. In New York, we have seen a surge in cycling as people seek to avoid the subway crowds.

What happens to revenue?
Developments like these appear inevitable. However, the loss of revenue for transport operators depends very much on the design and specifications of their contracts with government.

Most urban public transport systems in Australia are ‘gross cost’ regimes. This means operators are paid on a per kilometre basis regardless of the number of passengers carried. These operators are much less susceptible to changes in demand.

Transport operators who work off ‘net cost’ contracts – meaning they keep their fare revenue – are facing huge financial pressures. This in turn has implications for the cash flows of their suppliers, including vehicle manufacturers and consultancies.

Hong Kong rail operator MTR (which has businesses in Melbourne and Sydney), already battling almost a year of protests, has been forced into significant service reductions. In Japan, some Shinkansen services are being suspended as patronage plummets. Many Asian operators have diversified revenue streams from property developments, but large falls in patronage also affect the ability to collect rents (such as from retail).

We are also seeing US transit agencies calling for emergency funding as demand drops. Major service cuts are on the horizon – suggestions include running a weekend schedule on weekdays. This is likely to reduce patronage further as the service becomes less useful for the travelling public.

Any service reduction has major ramifications for public transport workforces. Permanent staff may have their work hours reduced, while casual staff will struggle to get rostered. This will add to the psychological impact on staff.

The global collapse in oil prices is another factor as the lower cost of fuel makes driving more attractive.

Beyond government-contracted public transport there are many intercity coach operators and small-to-medium-sized charter operators (many family-owned). These operators serve the school, tourist, airport, hotel and special-needs markets. They are all private commercial operators.

Many charter operators have already seen a massive reduction in bookings due to the summer bushfires and travel bans. The loss of international tourism and cancellation of school excursions and extracurricular activities will bring even greater pain to charter operators and their workforces. Chinese tours have been a large part of the charter market.

On the other side of the ledger are increased costs arising from enhanced cleaning efforts and changes in operational practices to reduce the risks of COVID-19 infection for as long as the crisis lasts.

A major issue in these circumstances is how to provide incentives for transport operators to go above and beyond what is required as part of their usual remit. Do operators merely ‘comply’ with their contract specifications, or do they see an opportunity to extract value from proactively deploying, for instance, an enhanced disinfection regime? Should the contracted operator bear the extra costs, or should government share these costs?

Reshaping the industry
COVID-19 brings enormous unknowns for the public transport sector. Cost and revenue pressures may lead to transport operators fighting for survival. The result could be market consolidation and less competition in the industry.

In the longer term, how can future contract design for both transport services and transport assets ensure resilience to ‘black swan’ events and encourage a proactive, rather than reactive, response? Too often, a myopic focus on cost reduction has governed these discussions.

Finally, is there a way to protect commercial operators from huge swings in demand?

The coronavirus pandemic demands an urgent operational response by our public transport systems. But it should also encourage a strategic rethinking of our institutional structures and how public services are procured. Let us create an opportunity for longer-term reform out of the crisis.The Conversation

Yale Z Wong, Research Associate, Institute of Transport and Logistics Studies, University of Sydney

This article is republished from The Conversation under a Creative Commons licence. Read the original article.

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    COMMENTS

    To make a comment, please register or login
    Blossom
    1st Apr 2020
    4:55pm
    How are some people going to get to medical appts if they have asthma, bronchitis or something similar? Some people don't drive at all for medical reasons. Not all can afford taxis
    Horace Cope
    1st Apr 2020
    5:22pm
    Public transport may scale back if there is a major drop in usage but it will (and must) continue. I note that this article has been penned by an academic with a theory and the response of one state Premier has not been factored in. That response is to hire more cleaning staff, not reduce services.
    Tanker
    1st Apr 2020
    6:23pm
    Public transport is truly essential and perhaps it should be taken back into public ownership and operatioin.
    Tanker
    1st Apr 2020
    6:23pm
    Public transport is truly essential and perhaps it should be taken back into public ownership and operatioin.
    inextratime
    2nd Apr 2020
    1:08pm
    Hi Tanker, you have the same prob as I have with each of your posts duplicating. Tip, after posting 'remove' one of them.
    greenie
    4th Apr 2020
    1:18am
    "Should the contracted operator bear the extra costs, or should government share these costs?"
    When you say this you really mean WE THE TAXPAYERS share the costs!
    Lookfar
    4th Apr 2020
    8:29pm
    greenie, - so called, there is much of our country's infrastructure that is publicly owned, - roads, parks, wilderness, rivers, (although some of them have been sneakily sold off, - with bad consequences,) water supplies, public television, (The ABC, ) much government agencies, most of the electrical delivery system, - the AEMO, the AMSC, etc. etc. - despite attempts to "privatise" any thing that is moving or not, (and proved catastrophic in England, the country with the closest legal system to ours), so your reply is quite telling, - you don't understand that if all is private enterprise, - there would be no roads, trains, no power, water, etc. as they would not be "profitable".
    - Just what would 'we the taxpayer' be actually able to do if locked down in our own little house with no transport, no power, no water, no electricity etc?

    With due respect, you and all others with your point of view, need to think quite a lot more deeply, beyond your propaganda, just how would you Eat, let alone anything else, so, I include an article you may find helpful in the following response, - as it is too big for this one.
    johnp
    4th Apr 2020
    12:38pm
    PT needs to continue esp for the vulnerable without access to say a car. Lower demand means easier for social distancing.
    Lookfar
    4th Apr 2020
    8:37pm
    Apologies Johnp, had to use your space to carry on my article, - which basically agrees with you.
    Hope that is OK?


    How To Tell Real News From Useless Narrative Fluff
    by Caitlin Johnstone
    When Zen teacher Issan Dorsey was asked to describe the essence of Zen art, he answered, "Nothing extra."

    "Nothing extra" is also of course the essence of Zen living itself: perceiving life as it actually is, as opposed to perceiving it through a bunch of believed narrative filters about yourself, about others, about reality, and so on. These narrative filters are an extra pile of layers that are added on top of the actual experience of life, and they give a distorted view which causes a lot of confusion and suffering. Relinquishing belief in them brings clarity and peace.

    This is also the essence of clearly understanding what's really going on in the world. Like so much else, the approach to the large is the same as the approach to the small, which is to say the approach to seeing clearly in the big picture is the same as the approach to seeing clearly as an individual: you need to learn to look at it without the extra narrative overlay.

    Because the news media are controlled by plutocrats who have a vested interest in protecting the status quo upon which their kingdoms are built, almost everything in the news is useless narrative fluff. It doesn't tell you what's really going on, it rather tries to influence what's going on by manipulating the perceptions of the audience. It does this by either (A) distracting from what really matters by focusing on what doesn't matter, or (B) actively working to manipulate how the audience thinks about a given issue.

    When you strip away all the empty fluff and manipulative spin, there are basically only four often-overlapping pieces of information that really matter in the big picture: (1) where the money is going, (2) where the resources are going, (3) where the weapons are going, and (4) where the people are going. When it comes to understanding world dynamics, accurate information about these four things is the only real news you'll ever encounter. Everything else is empty narrative spin meant to justify, distort, or distract from information about these things.

    If you ignore everything else and only focus on finding the most accurate information possible about these four items, you will have an infinitely clearer understanding of what's really going on in the world than someone who trusts news reporters to walk them through it.

    Watch where the money is going because you can trust the raw numbers of financial transactions a lot more than you can trust the stories people are telling. A massive percentage of daily news coverage goes toward analyzing the latest foam-brained gibberish that came out of Donald Trump's mouth even though we all know he's going to contradict himself two days later, but the fact that he's been heavily funded by an oligarch who happens to have been a longtime proponent of the Iran policies this administration has been advancing is much more solid.

    Zoom out and watch where the money is going in the big picture and you'll see that a grossly disproportionate amount of it is moving away from the general public and toward a very small group of people, which we just saw illustrated in the historically unprecedented multitrillion-dollar wealth transfer in the US corporate bailout. If you watch this small group and pay attention to the projects, candidates, think tanks and media outlets they pour their wealth into, you will notice that they exert an incredible amount of influence on all four crucial factors: where the money goes, where the resources go, where the weapons go, and where the people go.

    Watching where the resources are going gives you an even clearer image of what's going on because resources, unlike money, are completely independent of narrative. There is no such thing as "money" without the thoughts that humans agree to collectively think about it, but oil would still be oil even if all humans were wiped off the face of the earth. When you see the US ramping up escalations against Venezuela, ignore the narratives about "drug trafficking" and what a bad, bad man Nicolás Maduro is, and look at what resources lie beneath the ground in that nation to find out what this is really about. Mentally "mute" the soundtracks the political/media class spout about who's doing what to whom and just watch where the resources are going, and who's controlling them. That way you'll be able to discern the powerful from the disempowered and the takers from their victims.

    Watch where the weapons are going because those are another non-narrative factor which exerts a huge influence on the world; a bullet will stop a beating heart regardless of what the mind thinks about it. Ignore the irrelevant narrative fluff about where the coronavirus originated and whether or not it's racist to say "Wuhan virus", and look at the ring of US military bases encircling China and the way the Marine Corps is shifting its attention onto that nation. Ignore Trump's gibberish about ending wars and note that he's been expanding them and increasing foreign troop presence. Ignore the Democratic Party's nonsense about Trump having loyalties to Russia and watch his administration's many dangerous nuclear escalations against that nation. Ignore international finger-wagging at humanitarian abuses by Israel and Saudi Arabia and look at who's still selling them weapons and supporting them militarily.

    Watch where the people are going for another important piece of real information that isn't dependent on narrative. Where are the prisoners? Where are the refugees, where are they going, and what are they fleeing? Where are people moving to, and what do they want?

    With each of these four items you can simply watch raw data and ignore all the stories the establishment spinmeisters tell about that data. As long as you make sure you're getting the most accurate data possible, it's like you're looking at a globe and watching lines in four different colors moving around in it from place to place and person to person. And without anyone's stories tainting your view.

    You will notice that there's a heavy degree of overlap between these four items. You see the weapons moving toward China and you notice that's the nation with the US hegemony-threatening Belt and Road Initiative (where the resources are moving) and the key player in the US dollar-threatening Shanghai Cooperation Organization (where the money is moving). You see Julian Assange locked in prison (where the people are going) for exposing US war crimes (where the weapons are going). You see US troops illegally occupying Syrian oil fields (where the weapons and resources are going) to prevent the Syrian government from using it to rebuild the nation (where the money is going). And so on.

    Nearly everything that makes it to the top of the daily news churn is either propaganda distortion or distracting drivel, and either way you can safely ignore it. Just watch where the money is going, where the resources are going, where the weapons are going and where the people are going, and ignore all the narrative chatter.

    Nothing extra.

    ______________________________


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