The Quality of Mass Transit Railway Services Under the Current Fare Adjustment Mechanism
The quality of MTR services under the current Fare Adjustment Mechanism (FAM)
Lo Ka Fai, Andrew
The University of Hong Kong
UID: 3035066182
2014-05-02
1. Introduction
The appearance of Fare Adjustment Mechanism
When the merger of the Mass Transit Railway (MTR) and Kowloon-Canton Railway (KCR) was conducted in 2007, MTR became the only service provider in the railway market. At that moment, MTR implemented the fare adjustment mechanism (FAM), which allows the company to adjust its fare each year based on the formula. Under the formula, different factors will affect the result of annual fare adjustment. For example, the inflation rate and the salaries in the transportation sector are taken into account. According to the report of Transport Department (2012), the formula is as follow:
Fare Adjustment Rate = 0.5 x Change in Change in Composite Consumer Price Index + 0.5 x Change in Nominal Wage Index (Transport Services) – Productivity Factor
The original purpose of setting up fare adjustment mechanism is to limit the power of MTR to raise the fare in time of recession and to ensure that the general public can afford the fare in different business cycle. But as time goes by, people notice that this may not the case.
This paper will firstly discuss the current situation of fare adjustment and the change in quality of services. Then, we would try to figure out the potential problems of the current mechanism, and finally provide some possible solutions together with the foreseeable limitations.
2. Current situation
2.1 Fare adjustment
Since the introduction of FAM in 2007, the MTR fare adjustment rate every year shows the positive number. The first MTR fare adjustment took place in 2010, in which there was 2.05% increase in the fares. And the overall fare adjustment rate was increased by 2.2%, 5.4%, 2.7% and 3.6% in 2011, 2012, 2013 and 2014 respectively (Transport Department, 2012).
2.2 Quality of services
Lo Ka Fai, Andrew
The University of Hong Kong
UID: 3035066182
2014-05-02
1. Introduction
The appearance of Fare Adjustment Mechanism
When the merger of the Mass Transit Railway (MTR) and Kowloon-Canton Railway (KCR) was conducted in 2007, MTR became the only service provider in the railway market. At that moment, MTR implemented the fare adjustment mechanism (FAM), which allows the company to adjust its fare each year based on the formula. Under the formula, different factors will affect the result of annual fare adjustment. For example, the inflation rate and the salaries in the transportation sector are taken into account. According to the report of Transport Department (2012), the formula is as follow:
Fare Adjustment Rate = 0.5 x Change in Change in Composite Consumer Price Index + 0.5 x Change in Nominal Wage Index (Transport Services) – Productivity Factor
The original purpose of setting up fare adjustment mechanism is to limit the power of MTR to raise the fare in time of recession and to ensure that the general public can afford the fare in different business cycle. But as time goes by, people notice that this may not the case.
This paper will firstly discuss the current situation of fare adjustment and the change in quality of services. Then, we would try to figure out the potential problems of the current mechanism, and finally provide some possible solutions together with the foreseeable limitations.
2. Current situation
2.1 Fare adjustment
Since the introduction of FAM in 2007, the MTR fare adjustment rate every year shows the positive number. The first MTR fare adjustment took place in 2010, in which there was 2.05% increase in the fares. And the overall fare adjustment rate was increased by 2.2%, 5.4%, 2.7% and 3.6% in 2011, 2012, 2013 and 2014 respectively (Transport Department, 2012).
2.2 Quality of services
References: Lee, A. (2014). MTR directors may have pay cut for delays, Anthony Cheung warns. Retrieved from http://www.scmp.com/news/hong-kong/article/1455093/mtr-directors-may-have-pay-cut-delays-anthony-cheung-warns Lee, A. (2014). MTR fares to rise by 3.6 per cent in June. South China Morning Post. Retrieved from http://www.scmp.com/news/hong-kong/article/1458728/mtr-fares-rise-36-cent-june Lam, Y, Y MTRCL (2012). Announcement of Audited Results For the Year Ended 31 December 2011. Retrieved from http://www.mtr.com.hk/eng/corporate/file_rep/PR-12-013-E.pdf MTRCL (2014). Fare Adjustment Mechanism Review More Concessions and More Savings. Retrieved from http://www.mtr.com.hk/eng/whatsnew/fam2013.html Press Releases Press Releases. (2013). Outcome of review of MTR Fare Adjustment Mechanism. Retrieved from http://www.info.gov.hk/gia/general/201304/16/P201304160542.htm Siu, B (2013) Transport Department (2012). Review of the Fare Adjustment Mechanism of the MTR Corporation Limited. Retrieved from http://www.gov.hk/en/residents/government/publication/consultation/docs/2012/MTR.pdf