Advert

The wheels on the bus go round and round…

Far from the familiar nursery rhyme, the short-lived and unsuccessful Arriva story raises many questions and, hopefully, expert analysis can one day enlighten us on the matter.

The large number of cars circulating on Malta’s roads is a clear indication that the public transport system in Malta is not performing an adequate job. To the average Maltese , the use of public transport is still considered as an inferior service compared to a private car. Fiscal policy has so far been unable to alter this perspective. Notwithstanding all the costs associated with using a private car, households still continue to exhibit a strong preference for private transport. Admittedly, if one were to start charging for street parking, as in some other countries, this is likely to force some people to reconsider their decision.

There is consensus that an efficient and financially sustainable public transport system is critical for the economic progress of the country. Public transport serves three important functions. First, public transport allows cost-effective mass mobility. Groups of workers and students can reach their place of work or study more efficiently than if everyone were to use his or her private car.

Secondly, public transport facilitates integration: from a social perspective, it facilitates the mobility of the elderly who for whatever reason no longer drive or have never obtained a driving licence; and in a geographical sense, by allowing remote towns to remain within easy reach, not only for residential purposes but also for commercial purposes.

Thirdly, public transport is more environmentally-friendly it diminishes the amount of cars on the roads and reduces congestion. Malta’s recent public transport system shows how difficult it is to try to achieve the three objectives simultaneously while at the same time keeping fares low.

Should public transport be provided by the state or exclusively on a commercial basis? This is the starting point of any pragmatic approach to transport reform. The private sector option would rely exclusively on the profit motive to encourage the operator to deliver the service. The inconvenient truth is that the attractiveness of commuting routes in Malta is very uneven.

Some routes are financially rewarding, because of high demand, whereas routes to peripheral towns may be less attractive because of lower demand. This means that some form of government intervention would be necessary to ensure adequate connectivity to less popular destinations, both in terms of routes as well as frequency of service.

The traditional solution is to offer state subsidies to compensate for the loss-making routes. However, a more liberal approach could be a zone pricing system i.e. different fares depending on the zone. In this case higher fares on certain routes would compensate for the loss-making routes. Naturally, this presupposes a competent authority which is continuously vigilant to ensure that the agreed-upon service obligations are indeed respected and the monopolist’s pricing strategy does not abuse its dominant position.

Another strategic decision relates to the pricing of bus tickets to different customers, in particular, the extent to which a multi-tier pricing system should be allowed. This approach is based on the intuitive idea that since customers’ willingness to pay is different, the price can be adjusted accordingly. This is by no means an innovative idea.

Nobody seems to raise questions as to why the price of an economy class and business class airline ticket are so different (the difference cannot be fully explained by the slight difference in the service offered!). Multitier pricing was controversially applied to the tourist versus local passengers, creating significant resentment for the customers who ended up being charged higher prices. Nevertheless there are other ways to offer lower fares to frequent commuters, at the expense of occasional users. One simple idea would be to popularise long-dated, say annual, personalised bus tickets, which would translate into a cheaper daily fare than if one were to purchase daily tickets.

We will all benefit if the wheels of the bus go round and round.

Malcolm Bray is an economist.

Comments not loading? We recommend using Google Chrome or Mozilla Firefox with javascript turned on.
Comments powered by Disqus  
Advert
Advert