Will Public Transport Operators Survive the Corona Crisis?

Newsletter 7, April 2020

Will Public Transport Operators Survive the Corona Crisis? Prague Metro during rush hour on March 18, 2020

Dear ,

These days it will not be an issue for most public transport operators to have enough seats for their passengers, but financially speaking, the coronavirus has been a major challenge for the public transport sector. Will operators survive the COVID-19 pandemic?

Welcome to Modasti’s seventh newsletter, a special and extra-long edition this time. You subscribed to this newsletter recently, or we met or communicated at some point over the last three years. If you would prefer not to receive this newsletter, simply unsubscribe by clicking on the link in the footer.

How much money will public transport operators lose this year?

With COVID-19 holding the world in a firm grip since last month, most public transport operators have seen a drop in passenger numbers of 60-90%. Although many operators are currently running fewer trains and buses than normal, their costs are staying the same due to the extra sanitation costs and high rates of sickness among drivers.

It is difficult to predict how much money public transport operators will lose this year. It primarily depends on the type of contract they have with the government. In case of a gross-cost contract, the government bears the revenue risk, but in the case of a net-cost contract, the operator bears the risk of dwindling revenues.

How much money will be lost in a specific city or region will ultimately depend on how this coronavirus spreads over the coming months and how long physical distancing policies and lockdowns continue to remain in place.

Many cities will hopefully see a sharp drop in passenger revenues only in Q1 and Q2 of this year. But if the virus comes back in autumn 2020 and hits Europe, the Middle East, and the rest of the world even harder than now, the financial performance of the sector in both 2020 and 2021 will become very bleak.

Will governments bail out public transport operators?

Large industries and lobby organisations have asked their governments for financial support during these extraordinary times. Some governments have suggested that they will bail out airline carriers; some have already taken steps to do so.

The UITP, the International Association of Public Transport, has urged governments and cities to advocate for the basic continuity and survival of public transport services during the current pandemic, e.g. in this open letter to the European Commission.

Unfortunately, many national public transport associations and operators are too modest — maybe too shy — to appear on national television to underscore the importance of public transport for urban and national economies. However, they need to find a way to communicate this information, especially in light of the following two important benefits of public transport over individual car travel:

  • public transport is a mode of transport with low air pollution levels;
  • public transport requires daily exercise in the form of walking or cycling (to the station).

It is interesting to note that many COVID-19 patients have underlying health problems (like obesity). There may also be a correlation between the number of deaths and bad air quality (like in China and North Italy), like German professor Sucharit Bhakdi reckons in a video published on 19 Mar 2020.

Public transport can be part of the solution of COVID-19 and other health challenges. Therefore, the public transport sector deserves more financial support — or even bailouts — than other industries that are suffering from physical distancing and (semi)lockdown measures.

Is Integrated Risk Management the solution?

At Modasti Consulting, we believe that Integrated Risk Management could have assisted Public Transport Authorities and Operators to mitigate the current effects of the COVID-19 crisis. Some people will argue that the virus outbreak is a so-called Black Swan, an event which comes as a complete surprise and has major effects. We, however, think that this pandemic is not a Black Swan. In a 2018 LinkedIn article, we argued that an integrated approach to risk management is essential to get a clear overview of all types of risks affecting public transport operations (see also this link). For now, adequate risk management can assist in mitigating future effects of the COVID-19 crisis.

Risk Management specialist and Modasti associated consultant Petra van den Boorn gave a very interesting presentation about Integrated Risk Management in bus service tendering at the International Bus Conference 2019 half a year ago. Petra reckons in her presentation — to be found here — that integrated risk management can be of great value for Public Transport Authorities as well as Public Transport Operators.

Modasti over the last few months

Modasti’s main consultant, Arjen Jaarsma, has been involved in a Public Transport Study for Sakakah (Saudi Arabia) over the last seven months. He is part of a multidisciplinary team and his main task in February/March of this year was the development of an Investment Strategy (CAPEX), an Operational Plan (OPEX) and a Contract of Operations for the selected public transport system in Sakakah and surrounding areas. A final workshop of the project was planned for April but has been postponed until further notice.

Modasti in the coming months

Depending on the development of the COVID-19 pandemic, we hope to meet you in person at one of the following events we will be attending: the UITP 2020 Annual Reception (in Brussels, in June), the European Commission’s Urban Mobility Days (September, also in Brussels) and the UITP MENA Congress & Exhibition (in Dubai, rescheduled to October 2020).

For the moment, please stay safe!

Arjen Jaarsma Public Transport Expert
+31 6 235 88 096
Modasti Consulting

Modasti Consulting B.V.

Hofvijver 177, 5223 MC ’s-Hertogenbosch

the Netherlands