Protecting public transport from the coronavirus... and from financial collapse
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Social distancing and mass transit are two concepts that, quite literally, don’t sit well together. Yet even as the COVID-19 pandemic has forced cities around the world to implement stringent physical distancing measures, many of them have needed to maintain public transport services for essential workers. Of course, keeping transit open while protecting the health of passengers and staff requires sweeping adjustments. Authorities have taken measures both to limit non-essential travel and redirect some of the remaining demand to non-motorized or personal transport modes. As a result, there has been a widespread reduction in public transport ridership: according to recent estimates, passenger numbers in cities around the world are down 70 to 90%.
Emergency measures: Responding to the public health crisis
To ensure health and safety, transport authorities, operators, and international organizations have been working together to design and implement a wide range of emergency measures specific to COVID-19, which we have sorted into two categories. Let's take a look...
The first set of measures aim to minimize the risk of contagion:
- Disinfection: Public transit providers have adopted potent and frequent cleaning routines to disinfect their rolling stock and premises, from offices to depots, stops, and stations. Many are also providing hand sanitizer and portable hand washers, for both users and workers.
- Physical distancing: This includes practical steps to limit bottlenecks at turnstiles and boarding platforms, as well as protecting drivers and station workers with screens or shields.
- Communications: Operators have, for example, posted signs across their networks to discourage unnecessary travel, put down floor stickers to mark adequate spacing, and displayed information on how to access medical help.
- Contact tracing technology: Some transport systems are relying on digital platforms to help locate potentially contagious individuals and those in contact with them. Beijing’s subway has set up a system of online pre-trip reservations and voluntary on-board check-ins with QR codes, providing an interesting example of how to improve traceability and reduce passenger density while cities reopen.
The second category of measures is intended to adjust transport operations themselves:
- Service adjustments: Plummeting ridership requires quickly adjusting service schedules (frequencies, operating times, number of routes) to ensure service supply can be trimmed where less critical while reinforcing critical services to minimize overcrowding.
- Improved connectivity for health care providers and other essential workers: Several systems have added or changed services to connect health workers to medical centers expeditiously (e.g., dedicated shuttle buses between transit stations and hospitals).
- Shifting passenger traffic from public transport to other modes: In an bid to limit public transport use during the pandemic, some cities have developed safe and affordable alternatives such as emergency bike lanes and free bike-share or rideshare services for health care staff and other essential workers.
The way forward: Financial recovery
For many systems around the world, operating costs have been adding up quickly as emergency measures have unfolded. Operators have seen farebox revenues plummet but still have significant fixed costs, such as asset repayments, rents, labor and administration. Under these circumstances, many systems strapped for cash before the pandemic are now facing serious financial distress.
To ease the pressure, some governments are providing short-term support in the form of contingency subsidies. But many other countries are struggling to funnel money to their systems, especially at a time when they are also under pressure to rescue labor-intensive sectors like tourism, hospitality, and manufacturing. In other instances, contractual arrangements effectively transfer demand-related losses to operating companies, threatening their short-term liquidity and longer-term financial viability.
Informal transport providers, a key player in developing countries, are even more vulnerable than formal operators as they typically have less capacity to organize, request emergency funding, or access commercial financing.
In light of this, there is growing concern that the pandemic could pose an existential threat to public transport operators around the world. Governments should begin drafting recovery measures to ensure the financial sustainability of transport companies, particularly as the pandemic pushes the global economy to a significant slowdown.
We see at least five broad categories of recovery actions to consider, from shorter to longer term:
- Immediate: Conduct quick top-down and bottom-up financial analyses to estimate revenue losses, payment gaps, liquidity needs, and solvency capacity for public transport authorities, operating companies, and other service providers.
- In around 30 days: Deploy instruments for liquidity support, including cash injections through supply-side subsidies or adjusting per-km fares. Provide fast-disbursing credit lines offering guaranteed, low-interest loans to support short-term working capital needs.
- 2 - 4 months: Develop institutional, policy, and financial packages to help informal transport service providers. These could help catalyze formalization and corporatization programs. This measure should also include favorable exit strategies for informal operators.
- 3 - 6 months: Improve technical fare structures (i.e., paying for operations, fare collection, system management, or infrastructure availability) and boost complementary, non-fare sources of funding (commercial real estate, advertising, parking charges).
- Around 12 months: Renegotiate, amend or prepare new terms for provision of public transport services. Update current contract structures (for example, disaggregating fleet provision form operation), performance-based remuneration metrics, and risk identification and allocation to strengthen the longer-term solvency outlook for service providers. Review fleet upgrading programs (e.g., electric buses) and reprogram investments according to the new financial reality.
While cities have been extremely effective in sharing knowledge and adjusting public transport services, handling the financial consequences of the pandemic will take a lot longer and require a tailored approach. Unlike health measures or service adjustments, financial recovery measures are difficult to replicate across borders as they are tied to context-specific contractual arrangements, funding availability, and the size of stimulus packages. To avoid potentially damaging delays, governments should kickstart the process as soon as possible with their transport and finance heads, transit authorities, as well as formal and informal operators. The timeline onwards is uncertain, but the financial sustainability of transport systems is likely the next port of call.
- The World Bank Group’s response to COVID-19
- COVID-19 tools and resources for the transport community: International Association of Public Transport, International Transport Forum (OECD), International Union of Railways.
- For more information on measures to reduce infection risk on public transport, check out this article by the University of Sydney.
- Contact tracing is a vital tool to help manage disease outbreaks that many experts deem crucial to helping cities reopen. South Korea and Singapore, with its TraceTogether program, are pioneers. Technologies relying on mobile phones are likely to scale up globally thanks to an initiative led by Android and Apple. For more information, check out this communication from Korea's Center for Disease Control and Prevention and this blog post from the American Enterprise Institute.
This blog has benefited from timely contributions from (and enriching discussions with) Franz Drees-Gross, Almud Weitz, Bianca Alves, Alejandro Hoyos, and Andres Gomez-Lobo (University of Chile).
I don't think contract renegotiation should be an option. In Indian PPP contracts there are force majeure clauses, which need to be invoked. Force majeure clauses in Indian PPP contracts specifically address the impact of pandemics. Sanctity of contracts should be upheld in good times as well as bad.
This blog is extremely educative. I am a Director at the Nairobi Metropolitan Transport Authority-Kenya and Am well guided on the Strategies that will drive recovery of the Public Transport sector which has been negatively affected by the Covid 19 pandemic . The Authority is at the tail end of a process aiming at piloting the first Bus Rapid Transport system . The strategies advocated for managing the informal Sector currently private run and chaotic are highly acknowledged
Thanks for this, and this is useful for the transport organisation to get ready after covid 19 lock down release,
How interesting that you mention contingency subsidies and what they do. I am starting a new consulting business this year. I will find a good public transit recruiter to assist with this as well. https://christiankentconsulting.com/executive-recruitment