The Strategies and Revelation of Free Buses in Chengdu

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1 The Strategies and Revelation of Free Buses in Chengdu Chen,She ChengduAcademyofSocial Sciences,Sichuan,China November6,2014

2 The Introduction of Chengdu Buses Chengdu, located in the central area of Sichuan in China, is the capital of Sichuan Province. By the end of 2013, its urban population has reached 5.54 million, with total economic output up (GDP) to 910 billion yuan (USD 149 billion). Chengdu Bus Group Company is the only existing bus business entity in the central area of Chengdu, a state-owned enterprise with 62 years of history. By the end of 2013, it has become a system with 10,677 buses, 351 bus lines, the total length of which are 4,975 km. It owns 22,754 employees, with total asset of billion yuan (USD 1.8 billion). In 2013, the total bus mileage was 382 million kilometers, with 1.64 billion passenger trips, and 1.69 billion yuan (USD 277 million) operating income, and its transportation rate reached 28.12%; its public financial investment and subsidies amounted to 1.89 billion yuan (USD 310 million); the annual operating loss was billion yuan (USD 184 million).

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4 Contents The Strategies of Free Buses of Chengdu Ground Work of the Configuration of Free Buses The Revelation of Free Buses

5 The Strategies of Free Buses of Chengdu From June 1, 2007, to implement the strategy of discount for taking bus with IC card From January 1, 2008, free for people 70 years old and above From May 1, 2008, free transfers within two hours From September 1, 2010, charging IC card with 1 yuan and above From October 10, 2012, 44 free bus lines From July 1, 2013, implementation of three free policies

6 1 From June 1, 2007, to implement the strategy of discount for taking bus with IC card Before Ticket Reform 1. Coin/Cash: Air conditioning 2 yuan, 1 yuan for ordinary cars 2. IC card: the monthly card for adults can be used 100 times with 50 yuan charge, 100 times with 30 yuan for students, and the card can only be recharged for once a month. (1 USD = 6.1 yuan) Ticket Reform 1. Coin/cash: without change 2. IC card: the monthly card for adults can be used 20 times with 10 yuan charge, 25 times with 5 yuan for students, and the card can be recharged repeatedly. Situations for Ticket Reform 1. The first subway of Chengdu was under construction, and the road congestion is serious 2. Chengdus bus has encountered serious losses 3. After calculation, the bus fare is of elasticity

7 1 From June 1, 2007, to implement the strategy of discount for taking bus with IC card The Effects of Ticket Reform 1. IC card issuing volume has surged 2. full implementation of unmanned ticketing 3. IC card recharge points is in serious shortage

8 2 From January 1, 2008, free for people 70 years old and above Ticket Reform 1. people over the age of 70 can use their IC card for free for 100 times monthly 2. They can recharge their card for 6-month use one time 3. Government pays the insurance premiums for them Situation for Ticket Reform 1. Launching air-conditioned cars is resisted, the elderly have very strong opposite opions towards two-yuan air conditioning buses. 2. government pay more attention to benefiting the public with public transportation

9 2 From January 1, 2008, free for people 70 years old an above The Effects of Ticket Reform ,000 elderly people registered the older card, and enjoyed free public transport policy, with the elderly bus travel more convenient 2. Each year, the number of the elderly passengers benefited amounted to million 3. To guide the elderly to bypass the peak of traffic has become a new challenging work

10 3 From May 1, 2008, free transfers within two hours Ticket Reform Using card for the first trip The first shift Within 2 hours The second shift The Nth shift Ordinary bus Airconditione d bus Situation for Ticket Reform 1. Launching air-conditioned cars is very difficult 2. the line network is extended indefinitely, and optimization met some problems 3. more market players, and market integration is proposed

11 3 From May 1, 2008, free transfers within two hours The Effects of Ticket Reform 1. Bus upgrading 2. The network of lines was optimized 3. The average fare was increased from 0.83 yuan to 1.02 yuan (1USD=6.1Yuan) 4. With development of the city, bus traffic increased year by year, at present, there are more than 500 million people travels a day (before the reform, less than 200 million people travels) 5. unlimited transfers induce an invalid travel

12 4 From September 1, 2010, charging IC card with 1 yuan and above Ticket Reform 1. Free transfer for three times within two hours 2. The starting recharging fee for an IC card is reduced from 10 yuan to 1 yuan, recharging depends on the demands. (1USD=6.1yuan) Using card for the first trip The 1 st, 2nd and 3 rd shift Within 2 hours The 4 th shift The 5 th shift Ordinary bus Airconditione d bus Situation of Ticket Reform 1. unlimited free transfers have a negative impact on society, and need to be corrected. And 99.98% of the passengers would transfer no more than 3 times within 2 hours 2. People reflect that, the starting fee set by 10 yuan and above is with the problem of wasting, and the threshold for charge should be lowered

13 4 From September 1, 2010, charging IC card with 1 yuan and above The Effect of Ticket Reform 1. unlimited free transfers have been smoothly corrected 2. About 950,000 passengers enjoyed free transfers a day 3. Community groceries and bank ATM machines can be easily used for IC card recharging

14 5 From October 10, 2012, 44 free bus lines Ticket Reform 1. any bus line of which the length covers 70% of the total line between the second and third circle road is free of charge (a total number is 44), with no credit card, and no coin. 2. The free period lasts to June 30, 2013 Situation of Ticket Reform 1. The viaduct of Chengdu second circled Road was under construction, and the road congestion was serious 2. implemented the traffic control policy of Vehicles Restricting between the second and third circled lines

15 5 From October 10, 2012, 44 free bus lines The Effects of Ticket Reform 1. free transporting of passengers for 97,510,000 times 2. owners of cars that follows the Vehicles Restriction rules are free to bus travel 3. formed the phenomenon of comparisons among the passengers who are not accessed to enjoy the free lines

16 6 From July 1, 2013, implementation of three free policies Ticket Reform 1. all bus lines are free for using IC card from 5-7 a.m. 2. The new bus lines opened within two months are all free community bus lines are free for using IC card Situation of Ticket Reform 1. Elevated Road of the second circled road completed its construction on schedule, but the Vehicles Restriction rules are still carried out between the second and third circled road; June 30, 2013 will be the end date of the 44 bus free policies 2. During the morning peak, the full-loaded rate is too high 3. The rate of empty-loaded for new open lines is too high 4. The last kilometer of some of the communities are not covered by public transport

17 6 From July 1, 2013, implementation of three free policies The Effects of Ticket Reform 1. Free charge from 5-7 a.m., can abate the morning rush hour, thereby reducing the allocation of public resources 2. Free travel in the morning and being charged for returning, makes the overall operational efficiency improved.

18 6 From July 1, 2013, implementation of three free policies The Effects of Ticket Reform 1. Free charge policies carried out two months before the new line is open, turns the empty travel to vain travel, so as to enhance the publicity of bus lines, having a positive meaning to the development of new lines 2. To configure the vehicles of appropriate capacity according to passengers demand, can also save operating costs

19 6 From July 1, 2013, implementation of three free policies The Effects of Ticket Reform 1. Community buses take passengers to major stations for interchange with revenue increased rather than decreased. Chengdu bus itself has a free transfer 2. Implementation of full coverage within every 500 m, eliminating blind bus service spots

20 Ground Work of the Configuration of Free Buses The transporting capacity of Chengdu bus reserve is sufficient Rational public spending has become common practice Intelligent management promotes efficient supply Enterprises assessment mechanism becomes scientific and effective To open free bus lines has economic sustainability

21 1 The transporting capacity of Chengdu bus reserve is sufficient Since 2007, the annual purchasing number of high-end large capacity buses is from 1,000 to 2,000. The number for bus using for carrying every ten thousand people in the Center City is far more than 20

22 1 The transporting capacity of Chengdu bus reserve is sufficient From 2006 to 2013, Chengdu has been increasing investment in public transport and encouraging buses updating. Growth in the number of buses is demonstrated in the following figure: Vehicles Growth in the number of buses from 2006 to 2013

23 2 Rational public spending has become common practice After the serial ticket reforms of buses of Chengdu, the public in Chengdu are not sensitive to bus fares anymore and they gradually become accustomed to form a queue when waiting for cars, and be conscious of swiping their cards, which has become a beautiful landscape of this civilized city of Chengdu. Rational consumption and significantly increase of the level of civilization of passengers provide the necessary human environment for the implementation of universal free public transport, and there will not produce invalid flash needs because of free buses

24 3 Intelligent management promotes efficient supply since 2010 Chengdu bus has been in full application of intelligent scheduling system; after the opening of free bus lines, operations control center promptly sent the passengers flowing situation to the line dispatcher via GPS and car video surveillance systems, so as to adjust models, grid frequency to ensure that the bus capacity is in balanced configuration. Car GPS terminal Bus Intelligent Scheduling system Electronic stop sign Monitoring station Operations Control system Chengdu Public Transport Intelligent Dispatching System components

25 4 Enterprises assessment mechanism becomes scientific and effective Chengdu bus is based on charity, and stick to the implementation of "Separating" management; the operating units execute the departure plan in the line network center, and abolish of the assessment of the drivers economic tasks. The driver does not have the motivation of reducing service quality, thus the quality of services of free bus lines is ensured

26 5 To open free bus lines has economic sustainability Each design of free policies are able to increase the attractiveness of public transportation to ease congestion in the city so that the overall operational efficiency is improved; released public transport capacity can meet the operational needs of free lines. Under the conditions of excessively occupying or consuming public resources, letting the public enjoy a guaranteed free bus service, is a useful social welfare arrangement.

27 The Revelation of Free Buses of Chengdu Nonprofit public transport system The price elasticity of public transport to provide public services to more people Free of charge does not mean free of management

28 1 Nonprofit public transport system Public transport, as a social welfare undertaking, on the one hand maintains the basic daily travel of the public, on the other hand bears the important role of promoting the social economy, combining two features of public welfare and economy together. History continues to prove that the development of public transport should take social welfare as the fundamental element, and public welfare as basic orientation, and that any reform that harms the public interests of the society is doomed to fail. Transit system is an open, rather than a closed system, focusing on the sharing of passenger traffic from other modes of transportation of the city; to improve attractiveness of public transport is the bus company's mission.

29 1 Nonprofit public transport system From 2006 to 2013, in the environment of increasingly congested traffic, the bus passenger traffic of Chengdu still maintains the tendency of increasing year by year, making a positive contribution to the ensuring of smooth urban traffic and the slow block. Passenger traffic growth is demonstrated in the following figure: Passenger Trips(per 100 thousand) Passenger trips increase from 2006 to 2013

30 2 The price elasticity of public transport At a certain stage of development, public transportation demand has certain price elasticity. When the absolute value of the coefficient of the price elasticity of demand is greater than 1, lowering the price can increase the revenue. At the early stage of the buses prices changing in Chengdu, the coefficient of the price elasticity of demand is 3.5; it is of extremely high-degreed price elasticity. At present, the public in Chengdu are not sensitive to bus fares. At different stages of development, the strategies to effectively improve the attractiveness of buses are different. At the early stage of prices changing, buses in Chengdu are in accordance with the "small profits but quick turnover" management strategy, and have achieved a double growth in both the passenger traffic and the revenue under the situation of reducing the cost of public travel. Currently, the strategy of price reduction has only become the one for public welfare, a very limited role in improving the attractiveness of buses which while could be achieved by providing effective supply.

31 2 The price elasticity of public transport From 2006 to 2013, Chengdu buses have launched several times the reforms of busprice system for public welfare, with its passenger traffic revenue increasing year by year. Growth of the passenger traffic revenue is demonstrated in the following figure: Annual Income (10 thousand yuan) Growth of the Passenger Traffic Revenue of Chengdu from 2006 to 2013

32 3 to provide public services to more people Bus resources is in shortage Bus companies are to serve the wider passengers; our judgments of value and selection criteria are the sum of individual welfare. When the bus resource is in allocation, to meet the needs of more passengers should be considered in priority.

33 4 Free of charge does not mean free of management Free prices do not mean the lower quality of services: no fee benefits, does not mean you can reduce the quality of management and services. With the absence of management, or unscientific management, the result of free prices is often doing harm to the public instead of benefiting them. Let passengers choose to take bus travel with dignity : Only by diving down to seriously study the possible changes after the free policy, analyzing the intent of different groups, predicting adverse situations that may arise, and improving the quality of management and services from a scientific point of view, can we avoid "tragedy of buses".

34 Ending To endow public city buses with the attributes of public goods, promoting the progressive realization of the city bus being enhanced from the quasi-public goods to public goods, is not only a useful exploration to solve the problem of urban congestion, but also the effective entry point and support point to realize the principle of being people-oriented, as well as benefiting the public. At the same time, as long as we firmly grasp the three key points, namely: ample supply, demand rational and effective control when we are increasing the configuration of the factors of production of buses (right of way, land, capital, energy and other security conditions), "Free bus" is possible to be carried out. That, is the revelation that the phenomenon of Free Buses of Chengdu has brought to us.

35 Thank you!

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