Bus industry transformation: A bright future ahead

Transitioning to service contracting

THERE may be a need for a transition phase to service contracting, for example, if the government is not ready with the budget or administrative systems to implement it. Even without a service contract, it makes sense for bus operators to work together to achieve more efficient operations, so that they can achieve higher ridership and fare collection, despite the bus-seating limits. During this period, the consortium can begin to work together and build a strong partnership, so that they would be ready when service contracting is operationalized. How will this work and what can the operators do to set this up?

Each consortium should develop a management structure and an efficient decisionmaking process. A lot of time is needed to build understanding, respect and trust among all consortium members. There will be many questions that each consortium will need to answer for itself, but an important principle will be to find ways to treat every consortium member fairly while seeking what is in the best long-term interest of the group. Each consortium will need to be creative in finding “win-win” solutions.

A consortium can serve a route, collect all revenues into a common revenue pot, and divide them proportionately (an operator’s share in the revenue is equal to his share in the number of buses in operation). Buses can then be deployed in the most efficient way in order to serve the greatest number of riders. This way, operators on a route work as one team, rather than in competition with each other. The objective becomes enlarging the revenue pot for the benefit of all operators.

The consortium should prepare all the documentation needed on all operators and vehicles, so that it is ready to submit these to the Land Transportation Franchising and Regulatory Board or the Department of Transportation (DoTr) for franchise processing when the time comes. Detailed information on every vehicle will also enable the consortium to respond quickly once the specific vehicle requirements of government are available. The government is likely to have priorities for types of buses (e.g., first priority — low entry, two-door; second priority — not low entry, two-door, etc.; there can also be prioritization according to the age of the bus and whether is of Euro-4 standard). The consortium can then use the government’s priorities in assigning which buses will be used during operations.

In the meantime, it will also be good to set up the legal entity (corporation) that will embody each consortium, so that it will be

ready to execute a long-term service contract at any time. When the corporation is formed, the operational buses of each operator form part of the equity contribution of the shareholder; the buses then become part of the assets owned by the corporation.

A brighter future for commuters and the transport industry

With consolidation and a shift to service contacting, there will be a brighter future for the bus industry and for commuters. Here are the reasons:

– Stable, long-term contacts will enable bus operators to find financing for the needed fleet replacement to comply with emission and other technical standards. All buses should become compliant with upgraded emission standards and a large percentage of the new fleet should be “BRT (bus rapid transit)ready” buses, so that they can load and unload passengers at median stations and have faster boarding and alighting. It may also be possible to pilot the use of full electric or plug-in hybrid technologies for part of the fleet.

– Once the government begins spending for bus transport services, it will be keen to improve their efficiency and productivity. This interest will bring in much-needed investments in new infrastructure that will benefit the industry, including information technology systems, bus stops, BRT stations, bus-only lanes, and well-equipped depots and terminals.

– The DoTr will view buses and trains as complementary mass transit services that deserve equal attention and support. Up until now, the DoTr gave the bulk of its attention and financial resources to rail development. Having a more balanced allocation of resources between bus and rail services would be a welcome change.

How many buses would be needed in the future? Many more than what we have today. In the near term, physical distancing requirements has reduced the capacity of the entire public transport system. Even if the future demand for bus travel is much lower than in the past, the existing capacity in the bus industry would still be insufficient. With higher efficiency requirements for public transport and a growing population, there will be requirements for thousands more buses and public transport jobs in coming years, not only in Metro Manila, but also in every city nationwide. The local bus industry needs to embrace this future and work toward making bus services in the Philippines the best in the world.