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Following is a question by the Hon Michael Tien and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (June 18):
Question:
Since 2010, the MTR Corporation Limited (MTRCL) has increased its fares for five consecutive years under the established mechanism. Although MTRCL has offered various fare concessions, some members of the public are still dissatisfied that albeit having recorded sizeable profits, MTRCL has increased its fares year after year, thereby increasing their burden. Regarding the profits made and the fare concessions offered by MTRCL, will the Government inform this Council whether it knows, from April 1, 2010 to March 31, 2014:
(1) the total underlying business profit of MTRCL each year, with a tabulated breakdown of the profit arising from: (i) Hong Kong transport operations, (ii) Hong Kong station commercial business, (iii) Hong Kong property rental and management businesses, (iv) Hong Kong property developments, (v) Mainland China and international businesses, and (vi) other businesses (including Ngong Ping 360, railway consultancy and project management services);
(2) the total number of shops in MTR stations, the average lease period of such shops, and the rental income of MTRCL from the shops in each year (set out in table form); and
(3) the projected amount of the fare concessions to be benefited by passengers each year when MTRCL introduced them and the actual amount benefited by passengers each year, with a tabulated breakdown by its major fare promotions and concessions (including fare concession for children, Student Travel Scheme, fare concession for the elderly, Fare Saver discounts and half-fare concessions for persons with disabilities, etc.)?
Reply:
President,
The Government and the MTR Corporation Limited (MTRCL) carry out review on the Fare Adjustment Mechanism (FAM) once every five years in accordance with the Operating Agreement signed by both parties in 2007. The last review was conducted in 2013, followed by announcement of the new FAM based on the review outcome in April that year. The new FAM has been in effect since June 2013.
Details of the new FAM and related arrangements were reported to the Legislative Council on April 16, 2013. In gist, the new FAM serves two major purposes. They are:
(i) reviewing the original fare adjustment formula and expanding the scope of consideration under the mechanism by incorporating factors such as MTRCL's profitability and service performance as well as public affordability; and
(ii) 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, including:
(i) 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 2014 is reduced from the original +4.1% to +3.6%;
(ii) setting an affordability cap which links with the Median Monthly Household Income;
(iii) introducing a "Profit Sharing Mechanism"; and
(iv) 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" benefits passengers through the "10% Same-Day Second-Trip Discount" promotion.
Also, MTRCL has launched three new types of tickets, namely the "MTR City Saver", "Tung Chung - Nam Cheong Monthly Pass Extra" (Note 1) and "Monthly Pass Extra" (Note 1) to provide fare concessions to frequent medium and long-distance passengers under the new arrangements.
The new FAM and related arrangements enable 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 MTRCL.
Our reply to the various parts of the Hon Michael Tien's question is as follows:
(1) According to the information provided by MTRCL, details on its underlying business profit from 2010 to 2013 (MTRCL's financial year is from January 1 to December 31) are set out in Annex I.
MTRCL's interim results for 2014, which are yet to be announced, are commercial and price-sensitive information for the time being. As such, MTRCL is unable to provide details on its underlying business profit from January 1, 2014 up till the present moment.
(2) MTRCL has been striving to provide a comfortable and convenient travelling environment for passengers. Shops are provided in MTR stations along rail lines to facilitate commuters.
According to the information provided by MTRCL, the number of shops in MTR stations, the average lease period of these shops and the rental revenue are at Annex II. Due to the same reason set out in part (1) of the reply above, MTRCL is unable to provide rental details of shops in MTR stations from January 1, 2014 up till the present moment.
(3) The Government has been encouraging MTRCL to review from time to time the effectiveness of existing fare concession schemes, and consider introducing new ones, having regard to the outcome of the FAM review and its financial prudence as a listed company.
Based on the information provided by MTRCL, major fare promotions and concessions provided by MTRCL from 2010 to 2013 and the amounts involved are set out in Annex III.
Regarding the 2014 new concession schemes, MTRCL announced in May 2014 that in accordance with the outcome of the FAM review in April 2013, MTRCL will launch new fare promotions and passengers can enjoy more savings. These include the new "MTR City Saver" launched on June 8, 2014. In addition, the "Monthly Pass Extra" scheme launched last year will continue and benefit medium and long-distance frequent MTR travellers.
The new FAM has also introduced the "Profit Sharing Mechanism" and "Service Performance Arrangement". Under the new arrangements, passengers will receive additional fare concessions of $125 million and $27.5 million respectively in 2014. The total fare concessions of $152.5 million will be provided to passengers through the "10% Same-Day Second-Trip Discount" promotion for 3.5 months from June 29, 2014 to October 15, 2014.
Meanwhile, to celebrate MTRCL's 35th anniversary of serving Hong Kong people, MTRCL has decided to extend the "10% Same-Day Second-Trip Discount" promotion in the coming year from its original end date of October 15, 2014 to April 30, 2015. As a result, MTR passengers will enjoy this promotion for a total of 10 months. Together with the fare concessions under the "Profit Sharing Mechanism" and "Service Performance Arrangement", it is estimated that fare savings of about $425 million will be enjoyed by passengers.
In addition, to address the relatively high train loading situation during the morning peak hours and to encourage passengers to use MTR service outside that period, MTRCL will launch the "Early Bird Discount Promotion" Trial Programme for nine months from September 1, 2014 to May 31, 2015. Under the Trial Programme, passengers holding Adult Octopus will be able to enjoy a 25% fare discount when they exit from any of the 29 core urban stations between 7.15am and 8.15am from Mondays to Fridays (except public holidays).
It is estimated that the 10-month "10% Same-Day Second-Trip Discount", "MTR City Saver" and "Early Bird Discount Promotion" Trial Programme to be launched in the coming 12 months will bring fare savings of about $500 million to passengers.
Note 1: 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, June 18, 2014
Issued at HKT 12:45
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