Legislative Council Brief

Ref.: THB(T)CR 3/5591/94 LEGISLATIVE COUNCIL BRIEF Public Bus Services Ordinance (Chapter 230) NEW FRANCHISE FOR THE BUS NETWORK OF THE KOWLOON MOTOR BUS COMPANY (1933) LIMITED INTRODUCTION At the meeting of the Executive Council on 28 March 2017, the Council ADVISED and the Chief Executive ORDERED that a new franchise with conditions as set out at Annex A, conferring upon the Kowloon Motor Bus Company (1933) Limited (“KMB”) the right to operate a bus network for ten years from 0400 hours on 1 July 2017 to 0400 hours on 1 July 2027, be granted under section 5 of the Public Bus Services Ordinance (Cap. 230) (“the Ordinance”). JUSTIFICATIONS Bus Franchise 2. Under section 5 of the Ordinance, the Chief Executive in Council may grant to a registered company1 a franchise conferring the right to operate public bus service. Under section 6 of the Ordinance, a franchise may be granted for a period not exceeding ten years. Section 12 of the Ordinance prescribes that a grantee of a bus franchise is required to maintain a proper and efficient public bus service to the satisfaction of the Commissioner for Transport (“the Commissioner”) at all times during the franchise period. 1 This means any company registered under the Companies Ordinance (Cap. 622), or under the Companies Ordinance (Cap. 32) as in force from time to time before the commencement date of section 2 of Schedule 9 to the Companies Ordinance (Cap. 622). 3. The current franchise of KMB will expire on 1 July 2017. KMB has applied for a new franchise for another ten years. According to established practice, a grantee that has proven to be capable of providing a proper and efficient service and is willing to further invest in franchised bus operation may be granted a new franchise for a period of not exceeding ten years. The certainty of a ten-year franchise will facilitate long-term planning and development of bus service, including operation of loss-making but socially desirable routes. It will enable the grantee to secure financing on more favourable terms, thus reducing operating cost. A ten-year franchise will also provide room for weathering short-term business volatility. Bus operation is a labour-intensive service industry. A ten-year franchise is conducive to a more stable working environment for the grantee’s staff and the provision of a proper and efficient service to the travelling public. 4. Meanwhile, it is expected that the market share of franchised buses will continue to shrink with the commissioning of new railways in the coming years. For instance, following the commissioning of the Kwun Tong Line Extension in October 2016, the overall patronage on KMB’s bus routes serving Whampoa and Ho Man Tin dropped by around 10% in the first month of the new railway’s operation. Looking ahead, as the Shatin to Central Link (which is expected to come into operation in phases in 2019 and 2021) as well as the three priority railway projects under the Railway Development Strategy 2014 (namely Northern Link and Kwu Tung Station, Tuen Mun South Extension and East Kowloon Line) will all be within the service catchment of KMB’s network, KMB’s market share in public transport services will further shrink. The ageing population is also exerting pressure on KMB’s fare revenue in the longer run2. 2 Since 1993, franchised bus companies have offered concessionary half fares to elderly passengers through the Elderly Concessionary Fare Scheme (“ECFS”). Under the ECFS, franchised bus companies are exempted from the annual vehicle licence fees and receive reimbursement of rentals paid in respect of government land so as to facilitate them to introduce, or continue to offer, fare concessions to the elderly. Franchised bus companies shall absorb the fare revenue forgone which cannot be offset by the subsidy. Under the Government Public Transport Fare Concession Scheme for the Elderly and Eligible Persons with Disabilities (i.e. the “$2 Scheme”) introduced in 2012, the franchised bus companies still have to absorb any fare revenue forgone arising from the provision of fare concessions for the elderly under the ECFS (i.e. the difference between full fare and the concessionary half fare), while the Government will only reimburse the difference between the $2 fare and the concessionary half fare to the franchised bus companies. With the ageing population and growing number of elderly passengers, the financial burden borne by KMB for the provision of fare concessions to the elderly has kept on rising even after netting out government subsidies. The amount of fare revenue forgone borne by KMB in 2015 was about $310 million. KMB expects that such amount will continue to rise progressively over the next decade. - 2 - 5. To assess whether KMB is providing proper and efficient public bus services, the Transport Department (“TD”) has been reviewing its performance regularly through passenger satisfaction surveys, site surveys, vehicle inspections, examination of regular returns and feedback from the public. In the light of the assessment in paragraphs 6 to 8 below, we consider that KMB has been providing proper and efficient public bus services. As regards its willingness to invest in franchised bus operation, it is noted that KMB will enhance passenger facilities and offer new fare concessions as set out in paragraphs 9 to 12 below. With the bus replacement cycle entering its peak in the coming years, KMB will need to make a substantial investment of about $3.8 billion for purchasing 1 380 new buses (around 35% of its current fleet) in the coming five years for replacing older buses and further enhancing its service. Having taken all factors into account, the Chief Executive-in-Council decided to grant to KMB a new franchise commencing upon the expiry of its current one and running for a period of ten years, from 0400 hours3 on 1 July 2017 to 0400 hours on 1 July 2027. Assessment of Application (A) Service Performance 6. As at end-2016, KMB was operating 384 bus routes using 3 916 buses. Between August 2007 (commencement of its existing franchise) and end-2016, KMB’s average lost trip rate was 3.7%. In view of the relatively higher lost trip rates in 2011 (8.0%) and 2012 (4.6%), KMB implemented a series of improvement measures which had encouragingly brought the lost trip rate down to a low level of 1.5% in 2016, slightly better than the industry average of 1.6%. The average number of complaints against KMB per million passengers received by the Transport Complaints Unit under the Transport Advisory Committee (“TAC”) was 2.73, lower than the overall industry average of 3.52 during the same period. The average number of KMB buses involved in accidents per million vehicle-kilometre travelled was 2.90, lower than the overall industry average of 4.19 during the same period. As at end-2016, over 95% of KMB’s fleet were low-floor wheelchair-accessible buses for the convenience of wheelchair passengers; by mid-2017 the whole fleet is 3 The existing franchise ends at 0400 hours of 1 July 2017 to ensure continued operation of the bus services straddling the last day of a franchise onto the early hours of the next day in case of a change of bus operator following the expiry of that franchise. The new franchise will take effect immediately after the expiry of the current one. - 3 - expected to comprise low-floor buses. 7. With continual expansion of the railway network, the average daily patronage of KMB decreased slightly from about 2 762 000 passenger journeys in 2007 to about 2 705 000 passenger journeys in 2016. Nevertheless, KMB has strived to enhance its operational and network efficiency through vigorous rationalisation of bus routes in partnership with the Government. Between August 2007 and end-2016, KMB, with the assistance of TD, implemented 287 service improvement4 measures and 330 service rationalisation5 measures. It is noteworthy that in recent years, bus services in North District, Tai Po, Tuen Mun, Yuen Long, Sha Tin, Tsing Yi and Kowloon were rationalised under an “Area Approach”, through which bus services were reviewed holistically for a district as a whole, rather than on a route-by-route basis, with a view to maximising the overall benefits to the community. 8. TD commissioned an independent opinion survey in November 2015 to collect passengers’ overall opinion on KMB’s services. The results showed that 85% of the respondents were satisfied with the overall quality of services provided by KMB. A summary of the survey findings is at Annex B. Among the eight service performance aspects measured, KMB received satisfactory rating of over 80% in six aspects. The two performance aspects which received the comparatively lower satisfaction rating were environmental performance and service regularity. On environmental performance, all KMB’s buses have met the prevailing statutory emission standards at the relevant time when they were purchased (currently set at EURO V emission standards), with 51% of its current fleet being EURO V buses as at end-2016. With the on-going bus replacement programme, the percentage of buses of EURO V emission standards or above will rise to around 73% and 87% respectively in the next three and five years. As for service reliability, as reflected by the improving average lost trip rate mentioned in paragraph 6 above, KMB has been making continuous effort and has achieved noticeable result. 4 Service improvement measures mainly include introduction of new routes, frequency enhancement, extension of service hours and extension of routeing. 5 Service rationalisation measures mainly include route cancellation, frequency reduction, route truncation and re-routeing.

Load more