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The Chief Executive in Council (¡°CE-in-Council¡±) today (January 10) approved the granting of new franchises to Citybus Limited (for Hong Kong Island and cross-harbour routes)(¡°Citybus (Franchise 1)¡±), New Lantao Bus Company (1973) Limited and Kowloon Motor Bus Company (1933) Limited to operate their existing bus services upon expiry of their current franchises on June 30, 2006; March 31, 2007, and July 31, 2007 respectively.
The new franchises for Citybus (Franchise 1), New Lantao Bus Company, and KMB will run from July 1, 2006 to June 1, 2016; April 1, 2007 to March 1, 2017; and August 1, 2007 to July 1, 2017 respectively.
The Government¡¯s key consideration in awarding a bus franchise was the provision of proper and efficient service. The three bus companies had proved that they were capable of providing proper and efficient bus services and had committed to improving service standards, providing fare reductions and complying with new franchise terms for better regulation of their operations.
¡°In line with the practice of considering applications by existing operators for new franchises, each of the three bus companies is granted a new franchise of about 10 years. This will ensure continuity in the provision of reliable and efficient bus service to the community. This will also facilitate long-term planning and development of bus services of these three operators,¡± a spokesman for the Environment, Transport and Works Bureau said.
In terms of service and environmental improvements, examples of the bus companies¡¯ commitments including installation of black boxes on their whole fleet to monitor bus safety performance and that Citybus (Franchise 1) and KMB have committed to deploying additional buses of emission standard of Euro II or above on busy corridors to help reduce roadside emission.
With regard to fare reduction, Citybus (Franchise 1) and KMB have agreed to provide the following initiatives :¡ª
(a) 10 per cent same day return fare reduction on routes where the single fare is $15 or above (excluding Airport ¡°A¡± routes, recreation routes and racecourse routes);
(b) five per cent same day return fare reduction on routes where the single fare is between $10 and $14.9 (excluding Airport ¡°A¡± routes, recreation routes and racecourse routes);
(c) $2 flat fare or half fare, whichever is lower, for elderly on Sundays and public holidays (excluding Airport ¡°A¡± routes and racecourse routes);
(d) an addition of 47 bus-bus interchange (¡°BBI¡±) schemes; and
(e) extending initiatives (a) to (c) above to the equivalent routes operated by their sister companies, viz. New World First Bus Services Limited (¡°NWFB¡±), Citybus Limited (Franchise for Airport and North Lantau and Network) (¡°Citybus (F2)¡±) and Long Win Bus Company Limited, as well as routes jointly operated by bus companies; and
(f) the above initiatives, except for the additional BBI schemes, will be reviewed in three years¡¯ time when the Government next review the bus fare adjustment arrangement.
"Citybus, KMB, NWFB and Long Win have agreed to commence the special elderly fare discount on January 28 (the day before Lunar New Year¡¯s Day) so that the elderly can enjoy the discount early during those festive days. As the companies have to carry out modification work to the software and hardware of their Octopus systems for implementing the same day fare reduction initiatives, they will implement the discount on solely operated routes with single fares $15 or above and $10 to $14.90 from February 19. The discount on jointly operated routes will be implemented from July 1 as a longer lead time is necessary for the system modification," the spokesman said.
As regards New Lantao Bus Company, it would continue to provide the special elderly fare concessions on 10 routes on weekdays with a discount of $0.3 to $1.0.
New provisions or modifications are included in the new franchises to reinforce monitoring arrangements and meet bus operational needs. Major ones include :¡ª
(a) modify the existing clause to set out explicitly the power of Chief Executive-in-Council to adjust bus fares upward or downward and to reflect the inclusion of an additional factor of change in price of the cost elements and productivity improvement of the franchised bus industry in the new fare adjustment arrangement;
(b) add a new clause to require the grantee to adopt proven and commercially available technologies and products as specified by the Commissioner for Transport on existing and new buses to reduce exhaust and noise emission as far as reasonably practicable;
(c) incorporate additional requirements for the grantees to seek prior approval from Commissioner for Transport for installation of on-bus facilities and introduction of bus related ancillary/add-on services;
(d) add new requirements to promote procurement by the grantee through an open and competitive process to ensure transparency and fair deal in transactions between related parties in the same company group; and
(e) add a new clause to require the grantees to conduct annual system audit to ensure integrity of the information submitted to the Commissioner for Transport.
Chief Executive-in-Council has taken into account Transport Advisory Committee's advice in considering the applications. A copy of the committee's detailed advice is attached.
Chief Executive-in-Council today also approved the modifications to the Modified Basket of Factors (MBOF) approach in considering bus fare adjustment.
The new fare adjustment arrangement, applying to all bus franchisees, takes effect today.
Under the new arrangement, all factors already embodied in the MBOF approach have been retained with a fare adjustment formula and several new objective benchmarks for fare adjustment assessment added.
The outcome of the formula will be used by the Government as the reference indicator in considering whether fare adjustment rate is supportable and justifiable at a given juncture.
In addition to the outcome of the formula, the Government will also make reference to the median household income and the weighted average cost of capital (WACC) for the bus industry in gauging public affordability and the reasonable rate of return to bus operators for making recommendation on the rate of fare adjustment to the Chief Executive-in-Council. The triggering point for activating the passenger reward arrangement will be lowered from the original 13% return on average net fixed asset to 9.7%.
"The main objectives of these changes are to facilitate adjustment of bus fares upwards and downwards to provide greater responsiveness to the prevailing economic conditions, and to improve objectivity of fare adjustment process while maintaining the flexibility to consider the factors embodied in the MBOF approach," the spokesman said.
"The Chief Executive-in-Council will continue to retain the ultimate power of determining bus fares. The Government will continue the existing practice of consulting the Transport Advisory Committee and the Legislative Council Panel on Transport before submitting its recommendation on the rate of adjustment to the Chief Executive-in-Council," the spokesman added.
"The new fare adjustment arrangement would be reviewed in three years' time so as to monitor the effectiveness of the new approach," the spokesman said.
The Government consulted TAC and the Legislative Council Panel on Transport on the proposed new bus fare adjustment arrangement in November and December, 2005. Members of TAC and the Panel were supportive of the new fare adjustment arrangement.
Details of the Chief Executive-in-Council's approval for the grant of franchises to Citybus (Franchise 1), New Lantao Bus Company and KMB as well as the new bus fare adjustment arrangement are set out in the two Legislative Council Briefs issued today, which have been uploaded to the website of the Environment, Transport and Works Bureau (www.etwb.gov.hk).
Ends/Tuesday, January 10, 2006
Issued at HKT 17:40
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