Land Transport

Land Transport: Public Transport Council has announced a fare hike of 2.8% for bus and MRT rides from 5 Apr, based on a 0.6% contraction in the sector’s fare-formula output plus a positive 3.4% carried over from its previous year’s exercise. Singapore’s two public-transport operators are also required to contribute a combined $13.5m to the Public Transport Fund: SGD5.5m from SBST (Not Rated) and SGD8.0m from SMRT. The money will be used for the needy. With a fare revenue pool of SGD1.7b pa, this fare hike will translate into higher gross revenue of $48.5m for the sector. It implies net benefits of $35m, $16.4m accruing to SBST and $18.6m to SMRT. The quantum of the hike was expected, having been flagged by Transport Minister, Lui Tuck Yew, during a recent parliamentary reply. Allied with lower oil prices, this hike should provide some near-term margin relief for operators. However, Land Transport may not be a good proxy for oil-price movements in the medium term. This is because the sector’s fare-adjustment formula already takes into account changes in energy prices. In fact, in the same parliamentary reply, Minister Lui signalled that fares could be reduced by 1% in the next review. This could mute benefits for the operators.