LCQ8: MTRCL financial position and fare concessions

     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 29):


     Since 2010, the MTR Corporation Limited (MTRCL) has raised its fares for seven consecutive years under the Fare Adjustment Mechanism.  Although MTRCL has offered various fare concessions to passengers, some members of the public are still dissatisfied that albeit having recorded sizeable profits, MTRCL has raised its fares year after year, thereby increasing their financial burden.  Regarding the financial data of MTRCL and the fare concessions it offered to passengers, will the Government inform this Council whether it knows, in each of the past three years:

(1) the total profit of MTRCL's underlying businesses, and the respective profits arising from (i) Hong Kong transport operations, (ii) businesses at MTR stations in Hong Kong, (iii) property rental and management businesses in Hong Kong, (iv)  property developments in Hong Kong, (v) Mainland China and international businesses, and (vi) other businesses (including Ngong Ping 360, railway consultancy businesses and project management services) (set out in a table);

(2) (i) the total number of shops in MTR stations, (ii) the average lease period of such shops, (iii) the annual growth rate of the floor area of the shops, and (iv) the rental income of MTRCL from the shops (set out in a table);

(3) the advertisement income of each MTR station (set out in a table);

(4) the number and total value of the MTR Shops Coupons offered to passengers purchasing Monthly Passes;

(5) the total value of the concessions MTRCL offered to passengers for train incidents causing delays to their journeys; and

(6) the projected and actual total value of the fare concessions offered by MTRCL, with a tabulated breakdown by concession item (including fare concession for children, Student Travel Scheme, fare concession for the elderly, Fare Saver Discounts, half-fare concession for persons with disabilities, MTR City Saver, Monthly Pass Extra, Early Bird Discount, 10% Same-Day Second-Trip Discount and MTR Festive Discount, etc.)?



     The existing Fare Adjustment Mechanism (FAM) of the MTR Corporation Limited (MTRCL) has been put in place since the rail merger in 2007 to replace the fare autonomy the MTRCL hitherto enjoyed.  The FAM adopts a direct-drive formula.  Fares are adjusted in accordance with the figures released by the Government.  It is an open, objective and transparent mechanism.

     According to the Operating Agreement (OA) entered into between the Government and MTRCL in August 2007, the FAM of the MTRCL may be reviewed every five years.  The Government and MTRCL conducted the first review of the FAM of the MTRCL during 2012 to 2013 and announced the review outcome in April 2013.  That review introduced multiple measures to reduce citizens' fare burden of travelling by railway, while maintaining the financial prudence of the MTRCL as a listed company.  

     The next review is originally scheduled for completion in 2018. The Government announced on April 20, 2016 that it would advance the review with the MTRCL. The main direction of this review is to see how the operation of the mechanism could better respond to public concern about the relationship between fare adjustment and MTRCL's profitability as well as passengers' affordability, whilst still respecting the financial prudence required of the Corporation as a listed company, on the premise that a transparent fare adjustment mechanism banked on public and objective data and a direct-drive formula will be retained.  Details are in the "Consultation Paper on the Review of the MTR Fare Adjustment Mechanism" which has been uploaded to the Government's websites.  The websites are and

     My reply to the various parts of the Hon Michael Tien's question is as follows:

(1) The details of underlying business profits for the MTRCL from 2013 to 2015 are at Annex 1.  The underlying business profits being referred to include profits from all the businesses of the MTRCL.  Those from property developments and overseas businesses are also included.  

(2)&(3) The MTRCL advises that it has been striving to provide a comfortable and convenient travelling environment for passengers and providing shops in MTR stations, to meet the different daily needs of passengers.  MTRCL's rental information of shops in stations from 2013 to 2015 is at Annex 2.  

     The MTRCL engages advertising agency companies to handle advertising business within the MTR system on behalf of the Corporation.  There are varied modes such as advertising light boxes, train body advertisements and electronic displays at different advertising locations in MTR stations or train compartments.  The Corporation advises that, usually, the advertising agency companies will provide packages of different products and concessions to suit the needs of clients.  For example, a package may include advertising light boxes of different sizes in stations, station wall advertisements and advertisements on the train bodies.  Advertising income is not classified by stations.  As such, the breakdown figures for advertising revenue according to MTR stations cannot be provided.  Details of total advertisement locations and total advertising revenue from 2013 to 2015 are at Annex 3.

(4)to(6) The MTRCL offers a series of fare concessions and promotion schemes every year.  The Corporation estimates that, between 2013 and 2015, such promotions brought savings ranging from more than $200 million to around $500 million to passengers each year for the 12 months after the implementation of the new fares.

     Upon the first review of the FAM, a "Service Performance Arrangement" has been put in place in 2013, whereby regulating the MTRCL to set aside $1 million to $15 million, depending on the duration of disruption, for each service disruption (of 31 minutes or above) caused by factors within its control.  This will be given back to passengers by means of fare concessions.  Under the "Service Performance Arrangement", the amount set aside by the MTRCL in 2013, 2014 and 2015 was $13 million, $27.5 million and $20 million respectively.

     In 2013, the MTRCL also launched the "Monthly Pass Extras"to replace the original Monthly    Passes.  Passengers using the "Monthly Pass Extras" enjoy a 25% discount for connecting domestic journeys beyond the specified stations on top of the unlimited rides between specified stations within the month of purchase.

     In 2014, the Corporation launched the "MTR City Saver". This fare promotion scheme has been well received by frequent medium- to long-distance MTR passengers commuting within the urban area.  Holders of the "MTR City Saver" are entitled to 40 MTR rides between designated stations in the urban area within 30 days from the day of first use of the ticket for travelling.

     Passengers would receive a bonus $50 MTR Shops Cash Coupon for each purchase of any July or August "Monthly Pass Extra" in 2015 or purchasing the "MTR City Saver" during these two months.  A total of over 400 000 cash coupons were issued by the Corporation and the value involved was over $20 million.

     Besides, the MTRCL has been offering a wide range of on-going fare concessions and promotional schemes every year to benefit dedicated passenger groups, including the elderly, children, eligible students and persons with disabilities.  During 2013 and 2015, such fare concessions brought extra fare savings of more than $2 billion to passengers each year.  Details of the major fare promotion and concession items offered by the MTRCL during 2013 to 2015 are at Annex 4.

     In the coming 12 months, the MTRCL will offer passengers fare concessions of $175 million under the "Profit Sharing Mechanism" and that of $11 million under the "Service Performance Arrangement", through providing the "10% Same-Day Second-Trip Discount" promotion to passengers for more than four months. The MTRCL will also continue to offer promotions such as the "Monthly Pass Extras", "MTR City Saver" and "Early Bird Discount Promotion", introduce the "Designated Saturday Offer" fare concession scheme, and upgrade all MTR Fare Savers in Hong Kong to provide $2 discount, bringing an estimated fare savings of more than $500 million in total to passengers.

Ends/Wednesday, June 29, 2016
Issued at HKT 15:31