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Stagecoach inquiry call

Mon, 13 Sep 2004

Stagecoach inquiry call

Public Information Bulletin issued by RAM - Residents Action Movement RAM is standing eight candidates in the Auckland Regional Council election across North Shore, Auckland, Manukau and Franklin-Papakura.

CONTENTS OF BULLETIN (1) Open Letter to ARC on Stagecoach's high fares in Auckland. (2) Joint supporting letter from ARC councillors Brian Smith (Rodney) and Paul Walbran (Waitakere). (3) Supporting letter from Sandra Coney, Waitakere ARC councillor. (4) RAM briefing paper on Stagecoach fares.


(1) RAM Open Letter to Auckland Regional Council

ARC must investigate Stagecoach's high fares in Auckland

by GRANT MORGAN Spokesperson for RAM - Residents Action Movement

The Auckland Regional Council is giving Stagecoach almost $30 million each year to run bus services with fares 60 times dearer per kilometre than charged by a Stagecoach subsidiary in Britain.

Megabus.com is a fully-owned Stagecoach subsidiary running inter-city bus routes across England and Scotland. No public subsidies, either from central or local government, are received by megabus.com.

The megabus.com fare from London to Glasgow, a distrance of over 600 kilometres, is one British pound (about $2.75 in Kiwi dollars). This is a standard fare, not a temporary special.

In Auckland, the full fare for 5 kilometres on a Stagecoach bus is around what its megabus.com subsidiary charges for over 600 kilometres. That's 120 times dearer per kilometre. A local concession card only reduces Auckland fares to 60 times higher per kilometre than in Britain.

This fare differential of 60 times is made even more scandalous by the almost $30 million of ARC subsidies poured into Stagecoach each year, despite anecdotal evidence that Stagecoach fares in Auckland are higher than bus services in other Western cities.

Following RAM's recent disclosure of this 60 times fare differential, Stagecoach denied that high Auckland fares and ARC subsidies are being used to subsidise below-cost megabus.com fares in Britain.

But Stagecoach has refused RAM's call to open its books to independent scrutiny to check into our suspicions of international cross-subsidisation. If there's nothing to hide in the figures, why hide the figures?

RAM is calling for:

(1) An ARC request that Stagecoach opens its books to independent scrutiny. This is a reasonable request of a private company that has received scores of millions in public subsidies.

(2) An ARC inquiry into Stagecoach's high fares and public subsidies. This inquiry should be open to the public. If international cross-subsidisation is uncovered, then ARC subsidies to Stagecoach should be reviewed by the ARC.

For more information, contact: Grant Morgan 634 4432 (days & evenings) 025-622 1851 gcm@actrix.gen.nz -------------------------------

(2) Joint supporting letter from ARC councillors Brian Smith (Rodney) and Paul Walbran (Waitakere).

10 September 2004

Dear Grant,

With regard Stagecoach.

Thank you for the information related to your research.

We too would be interested to know how Stagecoach can offer such attractive fares overseas and if in fact the profits that are made in Auckland are being re-invested overseas and perhaps even being used to subsidise operations in England.

Best of luck with your inquiries.

Yours faithfully,

BRIAN SMITH PAUL WALBRAN --------------------------

(3) Supporting letter from Sandra Coney, Waitakere ARC councillor

10 September 2004

Dear Grant,

I spoke against the [Stagecoach] fare increase strenuously, and voted against it. It seemed insane to me that the ARC would contemplate fare increases at a time of falling patronage.

I have had negative feedback from constituents. One woman complained that the fares for her children to get from Massey into town to work etc had gone from $5.60 each way to $6.10, meaning bus transport was costing $61 weekly. This is a huge amount for young people on low incomes.

At the same time Stagecoach dropped a whole lot of journeys (at times of the day when there is less patronage). ARC had to pick these up as subsidised journeys, funded out of ratepayer money.

I agree that the whole bus situation needs looking at, not the least of which is the various pieces of legislation that support this unfair system.


SANDRA CONEY -------------------------------

(4) RAM briefing paper on Stagecoach fares

Why are Stagecoach fares in Auckland 60 times higher than in Britain?


You can now bus between London and the Scottish cities of Edinburgh and Glasgow, a distance of over 600 kilometres. for just one British pound (about $2.75 in Kiwi dollars).

That's the incredible deal being offered by megabus.com, an internet booking bus operation that's been rolling between British cities since March. The one pound fare is the regular price, not a temporary "special".

Megabus.com is the creation of Stagecoach, one of the planet's biggest private operators of public transport. This British-based corporation employs 30,000 staff worldwide, operates 16,000 vehicles and carries one billion passengers a year.

Within New Zealand, Stagecoach carries far more passengers than any other bus company, enjoying a near-monopoly advantage in Auckland and Wellington.

When I hop onto a Stagecoach bus at my home suburb of Mangere Bridge to go into central Auckland, about ten kilometres away, I face a full fare charge of $4.60.

Even a monthly bus pass, used twice each work day, will cost me more per trip in Auckland than travelling the length of England and Scotland. (I'm excluding the discounted monthly pass that Stagecoach is promoting in Auckland between August and October because it's a short-term special only.)

So 600 kilometres in Britain on Stagecoach subsidiary megabus.com costs less than ten kilometres here on a Stagecoach bus. That means Aucklanders are paying at least 60 times more per kilometre. How come?

If you believe the company's blurb, it's because megabus.com is "yield managed in the same way as the budget airlines".

That gobbledegook is the closest Stagecoach bosses have come to a public explanation of why Auckland bus users must pay a per kilometre rate 60 times higher than megabus.com travellers.

Okay, megabus.com's one pound fare for inter-city travel means full buses each trip, whereas Stagecoach buses in Auckland run part-empty during slack periods. But this doesn't go anywhere near explaining the magnitude of the fare gap.

For starters, the Auckland Regional Council subsidises most Stagecoach runs during slack periods, whereas no public funds go into megabus.com.

And during busy periods, Aucklanders are jammed into the aisle of Stagecoach buses, whereas megabus.com carries only seated passengers.

Each 70-seat bendy bus on megabus.com's London-Scotland route would return not much more than 70 pounds ($192.50) to Stagecoach for a trip of over 600 kilometres. I doubt this would cover fuel costs, let alone workers' pay, bus depreciation, vehicle insurance and many other expenses, never mind company profits.

So how do they do it? There seems only one rational answer: international cross-subsidisation.

High fares and public subsidies in Auckland are turned into bottom line gains for the firm's British bosses. The same with monies flowing into head office from other Stagecoach operations in Wellington, Canada, United States, England, Scotland and elsewhere.

These various income streams from around the globe merge into one corporate cash flow. This mixing of monies at Stagecoach head office makes it impossible for an outside analyst to separate out specific internal subsidies for megabus.com.

However, cross-subsidisation by other Stagecoach operations would appear the only reasonable explanation for megabus.com's ultra-cheap, below-cost fares.

So why would Stagecoach bosses set up a below-cost bus service subsidised by other arms of their corporate empire? To squeeze out commercial rivals from Britain's inter-city bus routes, which look set to become a new gold rush.

This strategy isn't new for Stagecoach. An English competitor, Darlington Transport, was driven into liquidation after Stagecoach began offering free bus trips. Such monopolistic practices, declated the UK Monopolies & Mergers Commission, were "predatory, deplorable and against the public interest".

According to the main owner of Stagecoach, Brian Souter, "ethics are not irrelevant, but some are incompatible with what we have to do because capitalism is based on greed".

Souter's words allow a peek into a corporate mindset usually well hidden by public relations waffle.

The new element this time around is the sheer scale of what's happening. Megabus.com represents a drive by Stagecoach to monopolise inter-city bus routes across the whole of Britain. Such a huge campaign to liquidate powerful rivals will require years of international cross-subsidisation.

And who will pay for these subsidies?

In Auckland, Stagecoach has received many scores of millions of dollars from the regional council to run buses on "uneconomic" routes. This ARC subsidy becomes part of the international cash flow that subsidises megabus.com's "uneconomic" fares in Britain.

So those paying aren't just Stagecoach passengers, but all citizens in Auckland and other cities where the company gets a public subsidy. Homeowners are stung by higher rates, while tenants pay indirectly when landlords put up the rent to offset rate rises.

And the price isn't just economic, but also social and environmental.

Because Auckland is returning higher than average profits to Stagecoach, its bosses insist on keeping control of the bus cashbox. They are refusing to play ball with ARC officials who want to pay the firm a fixed amount to run services, with cashbox takings then going to the regional council.

Stagecoach's grip on the bus cashbox is the main obstacle in the way of integrated fares in Auckland. And without integrated fares, patronage on public transport suffers, and this adds to car chaos, exhaust pollution and motorway construction costs.

So the fare differential of 60 between Stagecoach bus services in Britain and Auckland has enormously negative implications for the future development of public transport in our region.

I don't know if the ARC has been coming to similar conclusions about the linkages between megabus.com's ultra-cheap fares and the unacceptable economic, social and environmental costs being inflicted by Stagecoach onto Auckland citizens.

If the ARC haven't made these links, then I suggest it's about time they did. If they have, then they should be revealing their conclusions because the public has a right to know.


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