Do any major world transportation systems operate at a profit?

March 16, 2011 4:36 PM

Do any of the major world public transportation systems (Paris, Tokyo, Seoul, Madrid etc.) operate at a profit? I was pondering New York's constant MTA woes and was wondering if other cities had similar problems. What are the factors that lead to profitability vs. expense? etc etc.
posted by GilloD to travel & transportation (19 answers total)

Tokyo and Osaka are the only ones I know of:

There are two places in the world where rail’s success is not accompanied by excess costs and is felt throughout the urban area: Tokyo (Tokyo-Yokohama) and Osaka (Osaka-Kobe-Kyoto).

Violating the old transit myth that there are no profitable systems, data from the Union of International Public Transport (the international equivalent of the American Public Transportation Association) indicate both systems earn annual profits of approximately 30 percent over operating and capital expense.
posted by kitarra at 4:48 PM on March 16, 2011 [1 favorite]

MTR Corporation Limited is a company listed on the Hong Kong Exchange (SEHK: 0066) and included in the Hang Seng Index. MTR is a major property developer and landlord in Hong Kong that owns and runs the MTR metro system in Hong Kong and also invests and builds railways in different parts in the world, and has won contracts to operate rapid-transit systems in London, Stockholm, Beijing, Shenzhen, and Melbourne.

i will add that in my limited experience the mtr trains in hk are always on time
posted by sammich at 4:49 PM on March 16, 2011

When you say "operate at a profit" what do you mean, exactly? Do you mean "require operating subsidies" (without taking construction costs into account) or do you mean "recovers capital costs and turns a profit"?

There may be some transit systems that cover their operating expenses, but most do not. Expecting a transit system to cover both construction costs and operating costs from user fees would not be economically viable, which is why transit entities are almost always public or quasi-public. For some reason in the United States people think that subsidizing mass transit is a bad thing, but don't stop to realize that a) supporting transit benefits people who never use it, because it means fewer cars on the road and b) highways and air travel are also massively subsidized, and you don't see people complaining about the Interstate Highway System not operating at a profit.

The author of kitarra's link, Wendell Cox, is well known as an opponent to mass transit and smart growth.
posted by ambrosia at 4:54 PM on March 16, 2011 [11 favorites]

The answer to your question is yes. Vancouver's metro, for example, has operated in the black, and probably will again once capital costs related to the Olympics (and planned expansion) are paid. Incidentally, Seoul's metro loses money but not much. I can't remember the exact figures, but I remember reading in a Korean newspaper that it was on the order of a few million American dollars. That was about a year ago--much of the loss was tied to capital costs of expansion, if I remember right.
posted by smorange at 4:54 PM on March 16, 2011

It's kind of disingenuous to say Cox opposes mass transit. He just opposes some of its implementations.
posted by dfriedman at 4:59 PM on March 16, 2011

It seems to me that one of the main factors leading to profitability is population density, which is much much higher in Tokyo, Osaka, and Hong Kong than in, for example, Chicago. This sort of snowballs - if density is high enough then the ratio of riders to miles covered is higher to begin with, so the system has more money to invest, so the system is more convenient, so more people ride it, so it is more profitable. Plus places with higher density have worse traffic so it makes less sense to drive. Plus there's less parking. Plus distances are shorter so it's easier to walk from the train to your destination.
posted by mai at 5:24 PM on March 16, 2011 [1 favorite]

It would be interesting to find out if public transit systems can operate profitably without looking at setup costs, but including capital costs such as new vehicles/cars, upgrades etc.

The Indian Railways turned profitable a few years ago, but not sure about it now. But it surely doesn't run into great losses I think, considering it is one of the largest railway systems in the world and employs the most number of people.
posted by theobserver at 5:36 PM on March 16, 2011

He just opposes some of its implementations.

...depending upon which highway or developers' lobbying group is paying him at the time. Cox's examples are carefully chosen to set high thresholds that exclude all mass transit systems in the US, and his standard comparative approach, like that of Randal O'Toole is based upon the cherrypicking of externalities, tossing aside those that apply to road-building and private vehicle use.
posted by holgate at 5:42 PM on March 16, 2011 [5 favorites]

This economics professor used to give a lectures based on The Simpsons. He showed us "Marge vs the Monorail" and discussed the economics of trained based mass transit. His claim was that in America only New York and Chicago have the big enough swing between daytime population of workers and nighttime emptiness to actually make a system pay for itself.
posted by Chekhovian at 5:45 PM on March 16, 2011

To address the question more directly: the explicit subsidy that goes to public transport needs to be weighed against the implicit subsidy that goes to private transport, along with the externalities of both.
posted by holgate at 5:52 PM on March 16, 2011

Tokyo has two subway networks, TRTA and Tokyo Metro. The TRTA is operated by the City of Tokyo. Metro is privately run (it is also cheaper, cleaner, runs more frequently, has more lines, and goes more places you want to go—which might mean that they cherry-picked the profitable routes and left the city to serve the less-profitable ones.) There's also the surface JR lines—the JR is the privatized successor to the old (state-owned) Japan National Railway. I think it's "profitable" but that's a complicated tangle because the old JNR's debt was assumed by a holding company and then the operating company was split into regional companies.

There are also a lot of privately operated suburban commuter lines that connect to Tokyo. A lot of these have associated department stores (same is true in Osaka). If you see a department store whose name ends in "-kyu" (means "express"), it's associated with a train line. Hankyu, Tokyu, Odakyu.
posted by adamrice at 6:29 PM on March 16, 2011

I linked to Cox's piece without being aware of his bias, but I still find it an interesting read. Japan invested in significant transit infrastructure in their major population centers in anticipation of increased need, and it paid off. If I ruled the world, I'd do the same with other major cities; they're only going to become more dense in the next century.

Coming from Minneapolis, I've certainly seen the inverse: the more cuts that get made to the bus system, the less ridership they get, and they cut more lines/routes/stops or hike the fares and even more people opt out of the system.

This is a tricky question because public transit means different things to different people/municipalities, and there's no "right" answer. For instance, until a year ago Portland had a much loved "Fareless Square" (an area downtown in which one could hop on any bus/light rail train for free), originally begun to combat traffic congestion. London instead opts to fight traffic congestion by charging cars fees to operate in certain zones.

"Chicago [has a] big enough swing between daytime population of workers and nighttime emptiness to actually make a system pay for itself"

Interesting—I've heard that the CTA has the least public money per passenger mile of any major urban US transit system, and have always assumed that has something to do with how awfully it's run rather than how much demand there is for it.
posted by kitarra at 6:36 PM on March 16, 2011

The difficulty is that public transit has multiple roles: in addition to operating as a transportation system, it is typically expected to operate as a social service for people who have no other way to get around. So there may well be bus routes, light rail lines, and subway lines that turn an operational profit, but they're part of a larger system that is expected to provide basic transportation for everyone who can't use the publicly-funded road and highway system. The more parts of the city are built up in sprawling, car-oriented ways, the more expensive it is to provide that social service transit.

There's a good discussion at the Human Transit blog on the role of profit in transit.

I believe Calgary's C-Train is operationally profitable, but it's not easy to delineate which parts of the bus system are important feeder routes to the light rail, and which are justified mainly by social service reasons.

Operating cost/revenue comes down mostly to how many vehicles you're running, how many people are riding those vehicles, and fares. In the developed world, labor costs are the biggest factor in operations. So if you're running transit vehicles that have few people on them most of the day (e.g. suburb to CBD routes), that's costing a lot but bringing in little revenue. If you have a line with high all-day demand in both directions, it's more likely to come out on top. Running buses at night is important to quality of service, but is not likely to bring in much revenue. Routes on which people are making many short trips are bringing in more revenue relative to cost than routes on which people go the full length (e.g. commuter-type routes). Running one light rail train is cheaper than running four or five buses.

In terms of capital, suburban rail routes are likely to require more infrastructure per trip served due to longer average trips. On rail or bus, if a very large proportion of transit use happens peak hour / peak direction, then you may have much of your fleet only in use for several hours each day, and that's expensive.
posted by parudox at 8:19 PM on March 16, 2011 [1 favorite]

The National Transit Database (www.ntdprogram.gov) has what's called "farebox recovery", which the operating cost recovery of a system. THis is a mandatory reporting system for US transit systems that receive federal funding for capital and preventative maintenance expenses from the Federal Transit Administration (part of USDOT) - this is pretty much all systems in the US. Note that basically no transit system makes its operating costs back (rail may appear to have better farebox recovery - this is a symptom of rail often simply being placed on higher performance/ridership routes, rather than an inherent ability of rail to operate at less of a loss (bus systems in general - especially ones in rural or smaller cities are providing mobility services for the poor, disabled and elderly and aren't really oriented around cost recovery (ie, chargina premium distance based fare like commuter rail systems or BART or DC Metro)

Capital costs are another thing entirely (and are very high for rail systems
posted by waylaid at 8:21 PM on March 16, 2011

You want Table 26. That has the farebox recovery data.
posted by waylaid at 8:32 PM on March 16, 2011

I was opening up the NTD database, but found out that this blog post summarizes the data as well as I could. The biggest operators making an operating profit are for-profit services like Coach USA.

Which isn't entirely surprising, given their public utility role. It's like noting that most police or sewer departments don't make any money. Or that, say, Southwest Airlines isn't accessible to people at all income levels, and doesn't service every part of the country.

Amtrak is profitable on the Acela service through the Northeast Corridor, but it is mandated to provide service throughout the country, so it uses the profits to subsidize a lot of money losing routes elsewhere.

The major US systems (more than 10M trips a year, the top 125 or so) that come closest are the MTA subways in NY (67%), BART in SF (64.5%) and the Metro in DC (60.6%). The remainder over 50% farebox recovery are commuter rail operators in the NY (Metro-North, NJ Transit), LA, Boston and Philadelphia areas, the Philly and Boston subways, and light rail in Boston, Denver and San Diego. Of note, these are all rail components only. MTA has around 50% farebox recovery once you add in the buses, MBTA and SEPTA (Boston and Philly) are 46% and 42% respectively. For comparison, SF MUNI, Denver and Houston have 25%, 26% and 17% recovery. And since they've been mentioned, the CTA in Chicago has a 46% farebox recovery rate.

Canadian transit operators are slightly more profitable; Toronto has a 67% farebox recovery across all modes including bus. Most of the other major and mid-size cities are in the 45-55% recovery range, including many that operate buses only.

I'll quibble a little with waylaid's description that rail doesn't have an inherent ability to operate at less of a loss. Operating expenses on a per-seat basis are a lot lower for rail; the lion's share of the cost to provide service is in the driver's salary and benefits, and a subway driver can transport over a thousand passengers at a time, while a bus driver can carry around 60. That requires, of course, a lot of passengers. (Of course, rail systems also tend to require more expense in terms of station maintenance. But you can have rail stop at a simple curbside station.)

Adding in less centralized transit systems, in many developing countries systems like shared taxis are a key public transit component, and operate for profit. The colectivos of Buenos Aires have very low subsidies as well.
posted by Homeboy Trouble at 12:02 AM on March 17, 2011

Farebox Recovery Ratio

Operating at a profit for a public transportation system is a moot point unless the expenses are a ridiculous drain on the tax base. Sidewalks don't make a profit. Roads don't make a profit. Traffic signals don't make a profit, etc.

Yet, public transportation systems have a net benefit to the economy of dense cities. Without subway systems the roads would be so congested that there would be an economic drain caused by the inefficient flow of workers and consumers.
posted by JJ86 at 7:35 AM on March 17, 2011 [2 favorites]

What are the factors that lead to profitability vs. expense? etc etc.

At heart, public transit is allowed to run a deficit. That means that politically bad things like fare increases and service cuts are avoided until there is a crisis, and then only implemented at the bare minimum to get out of the crisis.
posted by smackfu at 9:04 AM on March 17, 2011

Your question is in the present tense, but would it be useful to you to include older systems as well?

If I understand correctly, many cities, including San Francisco, used to have privately-run transit systems, which I assume were profitable for at least some period of time.

Key System - San Francisco area

and this could be a gold mine of info:

Defunct public transport operators in the US
posted by kristi at 9:36 AM on March 18, 2011