Executive Council approves bus fare increase

The Executive Council today (April 19) considered the fare increase
applications from the Kowloon Motor Bus Company (1933) Limited ("KMB") and
Long Win Bus Company Limited ("LW"), and approved an overall average fare
increase of 3.6% for KMB and an overall average fare increase of 3.2% for LW. The
new fares will take effect on May 15, 2011.
Compared with the proposed fare increase rates applied by KMB and LW at the
rate of 8.6% and 7.4% respectively, the approved rates of fare increase are lower by
over 50%.
The Executive Council, in their deliberations, have fully considered and
balanced all relevant factors in the fare adjustment arrangement for franchised buses,
which include:
(a) changes in operating costs and revenue of the bus companies since the last fare
adjustment in June 2008;
(b) forecasts of future costs, revenue and return;
(c) the need to provide the operator with a reasonable rate of return;
(d) public acceptability and affordability;
(e) the quality and quantity of service provided by the bus companies; and
(f) a formula (Supportable fare adjustment rate = 0.5 x Change in Wage Index + 0.5 x
Change in Composite Consumer Price Index ("CCPI") - 0.5 x Productivity Gain).
A Government spokesman said that the approved fare increases have struck a
balance between minimising the impact of bus fare increase on passengers and at the
same time enabling the franchised bus operators to continue to provide public bus
services at its current standard.
"In processing KMB and LW's application, the Government has assessed
relevant operating information carefully and comprehensively, and considered that
there was a case for fare increases for the two franchised bus companies in order to
maintain their financial viability and service sustainability. On the other hand, the
Government understands that, under an inflationary environment, the general public is
very concerned about the impact of bus fare increases on their livelihoods. The
Government has therefore handled the fare increase applications with caution," a
spokesman said.
"The change in CCPI from the last fare increase in June 2008 to February 2011
is +5.72%. The approved fare increase rates for KMB and LW are in effect lower
than the inflation during the same period."
As regards the fact that the approved fare increase rates do not follow the
formula outcome (+3.92%), the Government spokesman explained that the formula
reflects changes in the macro-economic conditions and past operating costs of the bus
companies, and does not operate as an automatic determinant of bus fare adjustment
outcome.
The Government spokesman added that the Government understands that KMB
and LW are facing challenges in their operations. In particular, fuel prices have been
subject to an upward trend and remained at a high level since the two companies
submitted fare increase applications last year. The additional costs incurred have put
immense pressure on the two bus companies. However, having regard to public
affordability and acceptability in the inflationary environment, it is hoped that the bus
companies would share the hard times with the community, and continue to provide
quality services. In considering the bus fare increase applications, the Executive
Council has fully considered the views of the Panel on Transport of the Legislative
Council and the Transport Advisory Committee.