TNAG-0955-FCO40-1174-Legislation-for-traffic-on-roads-in-Hong-Kong-1980 — Page 310

XCC(80)4

(c)

increase bus carrying capacity by 40%;

(d)

reduce overcrowding;

(e)

reduce the average age of its buses from 10.6 years to 7.1 years;

(f)

D

(g)

provide additional depot facilities in Sha Tin,

Yuen Long, Shek Wu Hui, Ngau Chi Wan and Kowloon Bay; and

take steps to improve driver recruitment by, inter alia, paying higher wages.

The capital expenditure involved is expected to add up to almost $900 million.

An Appraisal of KMB's Fare Application

7

The Financial Monitoring Unit (FMU) of Economic Services Branch has studied KMB's application in the light of passenger forecasts prepared by the Transport Department. A summary of FMU's analysis is at Annex D. The analysis assumes a fare increase from 15th February 1980, the beginning of KMB's financial year, and indicates that, although KMB will make a profit in 1979-80, a transfer from the Development Fund will be required to bring this up to the permitted level of return. Given that the assumptions used are correct it is forecast that the Development Fund will build up to $107,1 million in 1980-81 and to $155.7 million in 1981-82. The FMU concluded, on the basis of these figures, that a fare increase on the scale proposed by KMB would not be necessary until later in 1980.

8

The analysis is, however, based on relatively optimistic forecasts, particularly with regard to demand. Forecasts of passenger demand, and therefore passenger revenue, are extremely difficult to make at the present time when considerable changes are taking place in public transport. Whilst the overall growth in demand for public transport will continue, inevitably KMB will lose some passengers to the Mass Transit Railway and will suffer some passenger resistance to its proposed fare increases. In view of the difficulty in predicting demand, therefore, KMB and Transport Department have since reviewed together the passenger predictions made by the department and employed in the FMU's analysis. Whereas the Company's and the department's figures agreed quite closely on passenger forecasts for Cross Harbour, Kowloon/New Territories and Rural New Territories routes, they differed considerably with respect to Urban Kowloon routes. KMB forecast 480 million passengers on these routes in 1980-81 whereas Transport Department forecast 600 million.

9

KMB argued that the Transport Department forecast was too high for the following four reasons:

G.S. 166

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