London Transport Buses 1998 Results:
Cost Reductions Continue;
No Operating or Capital Subsidies
London Transport Bus & Underground Operating Costs from 1985
London Transport Ridership from 1950
 In 1986, after a long period of
significant unit cost escalation, a
parliamentary mandate required that
London Transport (LT) begin
converting its bus services to
competitive tendering. By 1996, 57
percent of services had been converted,
and all bus operations had been sold to
the private sector. The newly privatized
companies held transitional non-competitive contracts for the remaining
43 percent of service. All services are
to be competitively tendered by 1999.
From 1970 to 1985, LT costs per
vehicle kilometer had increased 79
percent, after adjustment for inflation
(4.3 percent annually). The new
competitive environment created by competitive tendering reversed this cost trend almost
immediately (Figure #1), and the improved performance
has continued. By 1998, costs per vehicle kilometer had fallen slightly below the 1970 level
(inflation adjusted).
From 1985 to 1998, costs per
vehicle kilometer declined 44.2
percent, or 4.4 percent annually (Table).
Total operating costs declined
28.7 percent, while services
were expanded 27.7 percent
(from 268 million to 342
million vehicle kilometers).
If the costs per vehicle
kilometer had risen with
inflation (RPI) through 1998, an
additional £3.7 billion would
have been required to operate
service (costs per kilometer
would have risen an additional
72 percent. Instead of the £8.2 billion that was required to operated bus service over the
period, £16.4 billion would have been required. Alternatively, if no additional funding
had been provided, a service level reduction of 29 percent would have been necessary.
If the 1970-1985 cost trend had continued through 1998, costs per kilometer would have
risen an additional 72 percent. Instead of the £8.2 billion that was required to operated
bus service over the period, £16.4 billion would have been required. Alternatively, if no
additional funding had been provided, a service level reduction of 58 percent would have
been necessary.
By 1998, passenger fares covered the full capital and operating cost of buses for the first time in
decades. London Transport earned a £100,000 surplus. Presumably, the private companies
offering service also earned profits, though London specific results are not reported. This compares to a 41 percent loss (subsidy
requirement) in 1985 (Figure #2).
Ridership in 1998 was 1,277 million, up 10 percent from 1985. This is the highest ridership
figure recorded since 1978.
|
London Transport Bus Costs
|
|
Year |
Bus Kilometers |
Cost (1998$) |
Cost/KM
|
Change from 1985
|
| 1985 |
267.7 |
£809 |
£3.02 |
0.0% |
| 1986 |
262.9 |
£727 |
£2.77 |
-8.4% |
| 1987 |
259.7 |
£667 |
£2.57 |
-15.0% |
| 1988 |
262.9 |
£637 |
£2.42 |
-19.8% |
| 1989 |
274.2 |
£652 |
£2.38 |
-21.3% |
| 1990 |
282.3 |
£632 |
£2.24 |
-25.9% |
| 1991 |
300.0 |
£643 |
£2.14 |
-29.1% |
| 1992 |
316.1 |
£651 |
£2.06 |
-31.9% |
| 1993 |
321.0 |
£629 |
£1.96 |
-35.1% |
| 1994 |
325.8 |
£586 |
£1.80 |
-40.4% |
| 1995 |
322.0 |
£587 |
£1.82 |
-39.6% |
| 1996 |
329.0 |
£574 |
£1.74 |
-42.3% |
| 1997 |
332.0 |
£579 |
£1.75 |
-42.2% |
| 1998 |
342.0 |
£578 |
£1.69 |
-44.0% |
| Sources: Calculated from London Transport Annual Reports and UK
Department of Transport
Note: Competitive tendering program began 1986. By 1997, 60 percent of services were
competitively tendered (all other services operated by private companies under transitional contracts
pending full conversion to competitive tendering by 2001)
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