Bus fares: 'There will be no repeat of bumper profits'

Published on Thursday 4 December 2008 09:05

TAKING into account the adverse trading conditions that Lothian Buses has faced in the past year it is no shock that the company is seeking to raise fares across the board in the New Year. The only surprise is that it has not done so earlier.

Only the price of a single fare rose in April by 10p to help offset a predicted revenue shortfall of 4.5 million, largely due to the rising cost of fuel. But as diesel prices continued to soar it quickly became clear that a rise of this magnitude was inadequate to balance the books and although it might have been unpopular perhaps it would have been wiser to increase all fares

Next came a series of controversial service cuts which the council offset to a degree by pumping 150,000 into the company to keep some running. But even this measure was only a temporary reprieve and since then the axing of other loss-making routes has been proposed for January. To make matters worse, passenger numbers have fallen for the first time in a decade, which the company blamed on commuters becoming frustrated at longer journey times due to the ongoing tram works on many routes.

Despite the rapidly deteriorating position, the outgoing chief executive Neil Renilson ruled out a second fares rise this year and those on lower incomes at least should be thankful he was able to stave off unpalatable increases before now, even though it might be argued that a more aggressive pricing policy earlier this year might have reduced the impact of the latest round of price hikes.

A municipal bus service has a social aspect, without which people can find themselves isolated, and given that Lothian Buses is almost wholly publicly owned it bears more responsibility in this regard than the likes of First Group.

Certainly there will be no repeat of the bumper profits of almost 6m in 2007, but that was clear from the spring. And it would be a stunning turnaround if the council – which owns 90 per cent of the company – was able to draw anything close to the 1m dividend it pocketed from that record-breaking performance.

But the council relies on its dividend to fund other services, so further fare rises cannot be avoided if costs cannot be reduced and efficiency continues to be hit by circumstances beyond the company's control. How the double whammy of rising costs and falling passenger numbers will affect the company's performance this year and next remains to be seen.

All fares will now rise in January, but even increases of the proposed level will still represent good value compared to public transport in other cities. But the simple truth is that the only way of keeping on track is to make sure that the price of a ticket on most routes at least covers the cost of the journey.