The Economics

Costs

·         A dual system (one guideway in each direction) can be built through a mountain terrain for approximately $25 million/mile for the guideway, stations, monorail vehicles, and subsystems. This is less than the cost of other traditional solutions providing equivalent passenger capacity.

·         A single line system (one guideway with passing locations) can be built for about $15 million/mile for the full system.

·         Usually much more cost-effective than expanding a highway by an equivalent eight lanes of capacity.

·         Maglift^TM an be operated for less than other transit systems, see MagLift Monorail, technical paper.

·         Refer to the page on cost estimating for a discussion on the cost components of a monorail transit system for your corridor.

Benefits

·         Will generate significant revenue from fares.

·         Will generate significant "consumer surplus", the extra money that passengers would be willing to pay beyond the fare for the service and saving time.

·         Will reduce highway congestion in a corridor.

·         Will reduce exhaust emissions.

·         Will reduce construction environmental impacts. 

The "Subsidy"  Fallacy!

A common claim is that there are no profitable rail transit systems in the world. This is incorrect. A preliminary survey of transit systems quickly revealed that many transit systems are paying for themselves and do not require government subsidies. Profitable transit systems include:

British Rail.

British Rail was a perennial money loser. The last Conservative Government dissolved BR in March, 1997, and privatized the system along lines similar to the Japanese approach. 25 train operating companies (TOC) are now responsible for undertaking passenger rail services and operate under a franchise agreement. The franchises are for a multi-year period and were won through a competitive bidding process. The infrastructure is owned by Railtrack PLC, a privatized company, which charges the TOC's for access to its track and certain key railway stations. Most of the rolling stock is owned by three rolling stock leasing companies which lease to the TOC's.

Because the system was losing money, the initial winner of the TOC franchise was usually the company that needed the least subsidy. Of the 25 TOC's, two have become profitable already and another five will become profitable within several years. The whole system is expected to become profitable (the fees paid by the profitable TOC's will exceed the subsidies received by the unprofitable TOC's) by 2005. The profitable, or soon to be profitable, TOC's are:

·         Gatwick Express will pay £10.3 million to the government this year, and its contractual commitment is to be paying £17 million per year by 2005.

·         Thameslink will pay £17.1 million to the government this year, and its contractual commitment is to be paying £30 million per year by 2003.

·         Great Eastern will receive £8.6 million in subsidies from the government this year, but its contractual commitment is to be profitable by 2001 and to be paying £10 million per year by 2003.

·         Great Western Trains will receive £50.5 million in subsidies from the government this year, but its contractual commitment is to be profitable by 2005 and to be paying £2.8 million per year by then.

·         Midland Mainline will receive £0.9 million in subsidies from the government this year, but its contractual commitment is to be profitable by 2000 and to be paying £6.6 million per year by 2003.

·         West Anglia Great Northern will receive £26.8 million in subsidies from the government this year, but its contractual commitment is to be profitable by 2002 and to be paying £26.9 million per year by 2003.

·         West Coast Trains will receive £59.2 million in subsidies from the government this year, but its contractual commitment is to be profitable by 2002 and to be paying £55.6 million per year by 2003.

Japanese National Railroads

JNR was profitable until the mid 1960s. The late 1960s saw rapid progress in motor and air transport and JNR failed to adapt to the new conditions and became unprofitable. After several reorganization attempts, JNR was split up and privatized in 1986. Passenger services are provided by six passenger railway companies which lease their tracks from a holding company. Freight services are provided by JR Freight which operates on the passenger companies' tracks and pay fees to them. Each one of the six companies is profitable, and three are very profitable and have gone public with very successful offerings:

·         JR-West. This operates the high-speed intercity system, Shinkansen, in the western part of Japan. In 1998, it made 121 billion yen ($912 million) in operating profits.

·         Central Japan Railway Co. This operates the Shinkansen in the central part of Japan. In 1997, it made 389 billion yen ($3,144 million) in operating profits.

·         East Japan Railway Co. This operates the Shinkansen in the eastern part of Japan. In 1998, it made 333 billion yen ($2,524 million) in operating profits.

Other Profitable Systems

Other profitable systems include the Paris Underground and the Singapore transit system. Also:

·         Mass Transit Railway, MTR, a subway system in Hong Kong. In 1998, it made HK$1,875 million operating profit (after depreciation).

·         Kowloon Canton Railway Co., KCRC, a commuter rail system in Hong Kong.

Studies are underway to review transit systems worldwide and many more profitable transit systems are expected to be identified. A preliminary conclusion is that transit systems which are run as private enterprise systems, rather than as government entities, are more likely to be profitable.

Governments around the world heavily subsidize automobile and bus systems by building and maintaining roads with government funds raised through taxes, rather than from tolls, road and other user fees. Many governments likewise subsidize their rail transit systems in order to provide passenger and freight service to the populace.

We invite you to e-mail Meneren principal, Steve Guthrie, if you would like to discuss how to make your rail transit system profitable

Click here to return to the main monorail page, and click here to return to the home page.