A study of the fare structure of Hong Kong's railway system

Abstract

of dissertation entitled A Study of the Fare Structure of Hong Kong’s Railway System submitted by YUEN WING CHEONG for the degree of Master of Arts in Transport Policy and Planning at The University of Hong Kong in June 2005 Railways provide a safe, reliable, efficient and environmentally friendly transport service to the public. Being off road and a mass carrier, the railways have a unique advantage over other modes of public transport. In the densely populated and effluent city setting such as Hong Kong, the railways provide a promising solution to the traffic problem. However, railways are also a capital-intensive investment. Hence the question often raised is on how to ensure that new railway lines are financially viable. In looking at railway viability, the fare structure is very much at the heart of the operating revenue. The fare revenue is the main source of income to support the railway services. At the same time the railway service attributes as a form of public good since it is a means of efficient transport to the public, which is essential for the economic and social development. In addition, the railways are also faced with intense competition from other public transport modes. The combination of increased demand of the public for an affordable fare structure, the need to maximize the fare revenue as the main source of railway financing and operation, and the intense market competition constitutes a key question in transport economics. In this dissertation, through an examination of the fare-ridership relationship and factors affecting fare setting, an attempt is made to suggest various fare structure alternatives. It was found that instead of the commonly used distance based zonal fare structure, it might be possible to set a more flexible fare structure according to market situation and perception from the passengers. Such a structure, in order to be successful, must enable more accurate fare settings according to demand and cost conditions so as to earn sufficient revenue to cover the cost, and at the same time, maintain the competitive edge over other modes in the transport market so that it can simultaneously provide the service to meet the travel needs of the public. In the selection of fare structure alternative, it was found that the optimal fare structure should aim at maximizing the number of passengers rather than charging the highest fare with a corresponding reduction in ridership. Whilst both patronage maximization and revenue maximization could achieve the objective in achieving the maximum the fare income, it is believed that it is the former that will ultimately gain public acceptance. A Study of the Fare Structure of Hong Kong’s Railway System