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LCQ21: MTR fares
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     Following is a question by the Hon Tang Ka-piu and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Counil today (November 6):

Question:

     On June 30 this year, the MTR Corporation Limited (MTRCL) adjusted MTR fares upwards by 2.7%. There is a carry forward of an unspent sum of around $200 million committed from the 2012 fare concessions scheme of MTRCL. Under the new Fare Adjustment Mechanism (FAM), the fare concession account will also receive an additional $150 million under the Profit Sharing Mechanism as well as $13 million under the Service Performance Arrangement this year. A total amount of $363 million will be shared with passengers through extending the "10% Same Day Second Trip Discount" Scheme for nine months. Besides, MTRCL will also offer new fare promotions, e.g. the "MTR City Saver" (City Saver) Scheme and the "Monthly Pass Extra" Scheme. In this connection, will the Government inform this Council:

(a) whether it knows the total amount that MTRCL has shared with passengers through the "10% Same Day Second Trip Discount" Scheme since June 30 this year, the average weekly amount shared, the total number of beneficiaries and the daily average number of beneficiaries;

(b) as there are comments that the total amount that MTRCL had shared with passengers through fare concessions last year was not satisfactory, whether the Government has any mechanism to regularly review the progress of the implementation of various concession schemes by MTRCL and the effectiveness of the schemes; if it has, of the details; whether it knows the progress of MTRCL sharing the sum in the fare concession account with passengers through various concession schemes this year, and if MTRCL will offer new fare concessions again this year;

(c) as there have been instances of Octopus fares being higher than the corresponding Single Journey Ticket fares after each MTR fare increase since 2010, and the authorities have explained that if the Single Journey Ticket fares are adjusted to a level higher than the Octopus fares in one go, the rate of increase may be so high that the public will find it unacceptable, and MTRCL thus plans to narrow the gap between the two types of fare gradually in the coming years, whether it knows the details of the plan and the implementation schedule;

(d) whether it knows the sales figures of the various kinds of monthly passes launched by MTRCL this year;

(e) as some members of the public have relayed that the various monthly pass concessions offered by MTRCL at present are so fragmented with too many combinations that members of the public need to make efforts to make comparisons, and in response to my request made in connection with the consolidation of various monthly pass concessions, MTRCL stated that new types of tickets are part of the results of the whole review of FAM, whether new types of tickets cannot be launched until the next review of FAM (i.e. five years later);

(f) given that holders of City Savers are entitled to 40 MTR rides within 30 days in the urban area (i.e. the average fare per ride needs to exceed $10 for the ticket holder to enjoy a concession), whether it knows when City Saver will be introduced, and the number of fare combinations with fares currently exceeding $10 (set out the details in tabulated form); and

(g) as some members of the public have pointed out that they need to pay more in fare for their MTR rides by using monthly passes than by using other tickets, whether it knows the number of fare combinations with such a situation at present (set out the details in tabulated form)?
 
Reply:

President,

     The Government has reviewed the Fare Adjustment Mechanism (FAM) with the MTR Corporation Limited (MTRCL) in accordance with the Operating Agreement signed by both parties in 2007. Following the announcement of the review outcome in April, the new FAM took effect from June this year.

     The Government has reported the details of the new FAM and related arrangements to the Panel on Transport of the Legislative Council on April 19, 2013. In gist, the new FAM and related arrangements serve two major purposes. They are:

(1) reviewing the existing fare adjustment formula and expanding the scope of consideration under the mechanism by incorporating factors such as the MTRCL's profitability and service performance as well as public affordability; and

(2) relieving the fare burden on medium and long-distance passengers living in remote areas.

     By introducing various measures and arrangements, the new FAM addresses the needs of different groups of passengers. These measures include:

(1) retaining the direct-drive FAM formula, but with the calculation of the Productivity Factor (PF) value being subject to a new, objective and transparent methodology.  Under the calculation of the new formula, the PF value is increased from the original 0.1% to 0.6%. As such, the fare increase rate for 2013 is reduced from the original +3.2% to +2.7%;

(2) setting an affordability cap which links with the Median Monthly Household Income;

(3) introducing a "profit sharing" mechanism ; and

(4) putting in place a "service performance" arrangement whereby a fine will be imposed for unsatisfactory performance.

     The above four measures benefit all passengers.  The sum collected from the "profit-sharing" mechanism and "service performance" arrangement will benefit passengers through the "10% Same Day Second Trip Discount" scheme.

     Also, the MTRCL will launch three new types of tickets, namely the "MTR City Saver", "Tung Chung - Nam Cheong Monthly Pass Extra"(Note) and "Monthly Pass Extra" (Note) to provide more fare concessions to frequent medium and long-distance passengers under the new arrangement.

     The new FAM and related arrangements enable the MTRCL to maintain its financial prudence as a listed company while fulfilling its corporate social responsibility.  Furthermore, the new FAM addresses reasonable aspirations of the community and allows the public to share the success of the company.
  
     Our reply to the various parts of Hon Tang Ka-piu's question is as follows:

(a) and (b) According to the MTRCL, the sum for the "10% Same Day Second Trip Discount" scheme in 2013/14 (with effect from July 1, 2013) amounts to about $363 million and it comes from two sources. $150 million and $13 million are funded respectively from the "profit-sharing" mechanism and "service performance" arrangement under the new FAM. The rest are funded by the unspent sum of around $200 million committed from the 2012 fare concession scheme.  

     The MTRCL offered a fare concession of about $170 million in total under the "10% Same Day Second Trip Discount" scheme from July to October 2013. Calculating on the basis of altogether 17 weeks in the period concerned, an average weekly concession of about $10 million has been made, benefiting about 1.6 million passenger trips per day on average.

     It is expected that the total sum under the "10% Same Day Second Trip Discount" scheme in 2013/14 will be fully utilised in nine months (i.e. until April 2014). The Government will closely monitoring the implementation of concession schemes. The MTRCL will also review the effectiveness of various fare promotions and introduce different concession schemes in view of the market situation. Upon completion of various concession schemes, the MTRCL will submit to the Government the utilisation data of the promotions.

(c) In calculating individual fares, the MTRCL has all along applied the following guiding principles:

(1) adjustments to Octopus fares are in units of 10 cents; and

(2) adjustments to Single Journey Ticket fares are in units of 50 cents (as MTR Ticket Issuing Machines accept coins with value of 50 cents, one dollar, two dollars, five dollars and 10 dollars).

     The MTRCL advised that due to the differences in the units of adjustment to Octopus fares and Single Journey Ticket fares, the percentage increase of some Single Journey Ticket fares (most of which are Elderly or Child Concessionary Single Journey Tickets) would be quite high with a 50 cents adjustment when the above principles are applied in the calculation of individual fares. Thus, the MTRCL often decided not to adjust these Single Journey Ticket fares. However, such arrangement has created a phenomenon that some Octopus fares are higher than the corresponding Single Journey Ticket fares.

     If the Single Journey Ticket fares are adjusted to a level higher than the Octopus fares in one go, the increase rate may be too high. As such, the MTRCL can only adjust the fares suitably in response to the outcome of the fare adjustment in each year. The Government has urged the MTRCL to address the situation as soon as possible. Subsequent to the 2013 fare adjustment, the number of cases in which Single Journey Ticket fares are slightly lower than their corresponding Octopus fares has been reduced by 65% from 596 to 206 in heavy rail and 47% from 1,276 to 672 in Light Rail.

     The MTRCL plans to address these cases in the coming few years, with a view that Octopus fares would not be higher than the corresponding Single Journey Ticket fares eventually. As the fare adjustment rates under the FAM in each year are not foreseeable, the implementation timetable is to make continuous efforts to remove the situation gradually every year.  

(d) Monthly Passes are sold on a monthly basis.  The latest sales figures of various Monthly Pass Extra (i.e. October 2013) are tabulated below:

Monthly Pass Extra                Sales Figures
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Sheung Shui-Tsim Sha Tsui East    About 21,000
Tuen Mun-Nam Cheong               About 43,000
Tuen Mun-Hung Hom                 About 36,000
Tung Chung-Hong Kong              About  6,000
Tung Chung-Nam Cheong             About  6,000
 
(e) and (g) The MTRCL has been from time to time introducing different concession schemes in response to the market situation, with a view to attracting patronage from various passenger groups. Passengers may choose the most suitable fare concessions taking into account their individual travel patterns.  After implementation of these schemes, the MTRCL will review their effectiveness from now and then. It will also take into account of the outcome of the review of FAM as well as its financial prudence as a listed company when considering introduction of new fare concession schemes. As such, the MTRCL does not necessary have to wait for the next review of the FAM before launching new fare concession schemes.

     MTRCL's Monthly Pass Extra mainly target frequent medium and long-distance passengers residing in more remote areas or commuters who need to ride on specific MTR lines regularly.

     Apart from the unlimited rides between stations within the designated areas in valid month, Monthly Pass Extra holders can enjoy an additional 25% discount off the fares for domestic trips (except East Rail Line First Class Premium) outside the designated areas covered by the monthly passes. Subject to their individual travel patterns, ticket holders normally enjoy higher discounts for longer journeys and more rides. Some examples are set out in Annex 1. Therefore, the MTRCL cannot provide fare combinations whereby using tickets other than Monthly Pass Extra can enjoy more favourable fare concessions.  In fact, passengers taking shorter and fewer rides may consider using the "10% Same Day Second Trip Discount" scheme to enjoy fare discounts. Passengers may choose the ticket types or concession schemes that best fit their own travel patterns.

(f) Users of the MTR City Saver can travel 40 trips between any two stations within the designated urban area in 30 days at a price of $400. The designated area includes all stations on Tsuen Wan Line, Island Line, Kwun Tong Line and Tseung Kwan O Line, as well as the urban stations of Tung Chung Line, East Rail Line and West Rail Line (please refer to Annex 2). The MTR City Saver will also cover stations of all future local railway lines located in the urban area, including West Island Line, South Island Line (East) and Kwun Tong Line Extension.

     As part of the outcome of the review of FAM announced by the Government in April 2013, the MTRCL will launch the MTR City Saver scheme not later than the second quarter of 2014. Among the existing fares of applicable rail lines, about 40% of Adult Octopus fares (for a total of 1,148 trip combinations) exceed $10.  Passengers may approach MTRCL's Customer Service Centres for enquiries in future. With the gradual commissioning of new urban rail lines in the coming few years, the number of applicable fare combinations will increase. The MTRCL will launch promotions accordingly.

Note: Holders of the original "Monthly Pass" have to pay full fare for the onward domestic journeys reaching stations not covered by the pass. "Monthly Pass Extra" provides an additional 25% fare discount for these onward domestic journeys.

Ends/Wednesday, November 6, 2013
Issued at HKT 15:01

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