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Should the O’Farrell government lower Sydney airport rail fares?

The NSW Government is about to land a big windfall from the airport rail line as revenue-sharing provisions kick in. But should it return the money to airport train travellers or keep it?

Sydney's Airport Link rail service

The NSW government has an interesting and challenging dilemma.

At present, the full fare for travel by rail from the CBD to the domestic airport terminal is $15.90 (and $16.70 to the international terminal).

However $12.30 of this is a “station access fee” – a surcharge that goes to the builder and operator of the rail service (now Airport Link Company Pty Ltd).

But as from next month, when the operator achieves a certain revenue threshold, the 2005 agreement provides for 50% of the surcharge to go to the government. This will increase to 85% next year.

The revenue involved is significant. It’s likely to be $18 million this year, rising to $30 million next year. Thereafter it will grow (or fall) in line with patronage. The Airport Link Company will receive the remaining 15% until 2030.

All this is due to the spectacular growth in patronage the company has achieved since it took over the rail line. I noted last year (Is rail on track at Sydney Airport?) that rail’s mode share at the airports was 16% – now it appears to be around 17%.

The dilemma is what the Government should do with the money: keep it or reduce the fare to circa $4?

The government’s already said it intends to hang on to it, but there are vocal calls to return the windfall to travellers in the form of lower fares. The Tourism and Transport Forum (TTF), for example, wants the surcharge removed.

Particularly for the price-sensitive market, to get to the platform and find it costs an extra $12.30 – that does not create a great first impression.

There are a couple of arguments for removing the surcharge.

One that’s likely to resonate with the general public is simple: now that the capital cost of the rail line has been recovered, there’s no warrant for maintaining the station access fee. Fares to the domestic and international airports should now be set on the same basis as the rest of the CityRail network.

Another is it would encourage mode shift from road to rail by making the latter mode cheaper. That would lower congestion on the roads around the airports, particularly the domestic terminal.

Last year’s Federal/NSW Joint Study on airport options for Sydney estimated removal would increase the number of airport rail users by 26% in the first year and 34% in the long run. It said the benefits for travellers from doing away with the surcharge would exceed the cost to the State.

Of course there’re also opposing arguments i.e. supporting the Government’s decision to keep the revenue.

A key one is it could be used to fund new projects that provide a superior net benefit for the State compared to giving airport train travellers lower fares. For example, projects that make public transport faster, more frequent or safer might (possibly) yield a higher net benefit.

Rail also recovers very little of its capital and operating costs, so retaining the surcharge more accurately reflects real system-wide costs. The NSW Auditor-General reported last year that each rail journey in NSW costs the State, on average, $10.01 (in real money).

This line of thinking might not fly well politically though because the government’s already said it’s putting the money into general revenue rather than hypothecating it to public transport.

Another argument is that although the patronage increases for rail estimated by the Joint Study look impressive, they would only delay the need for major road works by between one and four years.

Mode shift would also reduce traffic heading to and from the airport over a broader geographical area, but it’s likely other (induced) traffic would take up the liberated capacity.

A large increase in rail patronage would conversely bring forward the need to expand capacity on the airport line. The Joint Study says additional works will be needed in 2021 on current policy settings, although it doesn’t indicate the cost.

An important qualification is needed here: the Joint Study relied on a “rapid cost benefit analysis”. A more thorough study might provide different results.

Apart from the operator, those who’d benefit from reducing the surcharge include visitors to the State and domestic business travellers. However their travel behaviour is relatively insensitive to the level of fares.

Price-sensitive domestic travellers would also benefit, but they don’t fly frequently.

Finally, many airports around the world charge airport travel on a full cost-recovery basis. Melbourne’s SkyBus, for example, charges $17 one-way, nothwithstanding the roadspace it uses was built long ago.

I’m going to squib my take on this a bit because it’s a complex issue and information is incomplete or lacking.

There’s little doubt maintaining the surcharge will be seen as unfair by some, although so far at least it doesn’t appear to be a major political concern despite the TTF’s best efforts. Perhaps that’s because the electorate is very ‘loss averse’ but relatively ‘gain indifferent’.

On the other hand, governments don’t have enough revenue so they shouldn’t relinquish new sources lightly. If the money can yield a higher benefit for the public in another use, then the surcharge should remain in place.

On the admittedly imperfect information available publicly I suspect there probably is a better use. If a “tax” on airport train users gives the Government the capacity to fund projects like the George St light rail, then it might well be the best use of the money.

Given it’s decided to keep the money, the Government should explain to the the community how this is a better deal for them than lowering the airport rail fare.

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  • 1
    el tel
    Posted February 6, 2013 at 8:28 am | Permalink

    The current situation is ridiculous. As a transport economist noted to me when we both boarded the train, you pay a lot more to board the same (overcrowded) Sydney train at the airport than the local station that preceded it. One of many poorly thought out aspects of Sydney Airport.

  • 2
    hk
    Posted February 6, 2013 at 9:03 am | Permalink

    Would decision making based on quantifying the potential to significantly reduce commuter traffic generated by travellers, greeters and airport employees on the road network by fare reduction assist?

  • 3
    Alan Davies
    Posted February 6, 2013 at 9:11 am | Permalink

    hk #2:

    Definitely, but the info provided by the Joint Study is pretty sketchy.

  • 4
    Bill Bunting
    Posted February 6, 2013 at 11:29 am | Permalink

    One of the major problems for the airport line is that the modelling expected to raise substantial revenue from airport staff and a concession fare was intended. The problem with this plan was that they do not run the trains early enough for the staff to get to work on time (someone may have forgotten to check that little detail in the original modelling) and then rail renigged on the concession fare (as I heard it).

    If rail sharpens up its act to suit the needs of the public then they might improve their overall traffic/revenue, and be able to reduce the airport line fare.

  • 5
    Grant Butler
    Posted February 6, 2013 at 3:54 pm | Permalink

    Keep the price the same but do what they do in almost every half-decent city in the world with an airport train – provide a *dedicated* service with a good quality train that is not full of commuters, runs non-stop and has space for luggage. What we have is embarrassing and pathetic. I’ve had to use it a few times over the years and it appalls me every time.

  • 6
    Steve777
    Posted February 6, 2013 at 5:27 pm | Permalink

    I find the train very convenient and in spite of its obvious drawbacks, as long as the amount of luggage you have can be conveniently carried. It has a few clear advantages:

    - it takes you right to the terminal
    - no need to get a taxi – a real hassle in Sydney
    - avoid Sydney traffic – ditto
    - no need to use the airport carpark

    I’m not too fussed about the surcharge, but if reducing or removing it will increase patronage, take cars off the road and free up more taxis, I’d say go for it.

  • 7
    Hamis Hill
    Posted February 6, 2013 at 8:41 pm | Permalink

    Increased patronage equals increased income equals ability to reduce fares equals inceased patronage.
    Too complicated for the cretins running politics.

  • 8
    Daniel Bowen
    Posted February 6, 2013 at 10:28 pm | Permalink

    I assume one possibility is to cut the fare to a much more palatable level of, say, $7 or $8, and keep some of the money. With an expected increase in patronage, might it even come close to breaking even (assuming crowding doesn’t trigger the need for service increases)?

  • 9
    MJPC
    Posted February 7, 2013 at 8:46 am | Permalink

    As a user of the airport line daily due to employment I have been fleeced by successive governments since its creation.
    Coming from Western Sydney I pay a premium onto a normal weekly to travel 4 extra stops, yet I cannot use the ticket to exit via the barriers at Central station (or any city circle stations) if I wish to visit the city.
    In Sydney public transport users are treated as sheep, to be ‘fleeced’ at every opportunity.

  • 10
    Simon Lovell
    Posted February 7, 2013 at 10:00 am | Permalink

    Lowering airport rail fares is an axiom.

    26% market share, up from 17% in one year and 34% longer term could be pessimistic. They were far too pessimistic on Green Square and Mascot too.

    I’m not sure that the TTF actually said to lower the surcharge to zero, just to lower it. Most airports do charge some kind of premium for such a service – it’s $5 at JFK.

  • 11
    Alan Davies
    Posted February 7, 2013 at 10:11 am | Permalink

    Simon Lovell #10:

    The SMH reports Mascot and Greensquare got a 40% increase in patronage when the access fee was removed. And it was only circa $2.50!

    However two big differences relative to the airport stations are (a) the wider array of trip purposes, especially daily commuting, those stations attract, and (b) the fact that a much lower % can get their travel costs paid for fully by their employer.

    The idea of a compromise is certainly being pushed in some quarters (I didn’t mention it because it’s easier to distil the issues by comparing 100% with 0%). It would be valuable to estimate what mode shift would likely be induced by, say, a 50% cut in the surcharge. It might be that any further cut would give diminishing returns.

  • 12
    Simon Lovell
    Posted February 7, 2013 at 10:52 am | Permalink

    Actually, it rose 70% within a few months. Not sure what 2012 figures are but I am sure it is even more.

    http://www.smh.com.au/nsw/tickets-sales-rocket-on-airport-line-as-prices-plunge-20110608-1ft9l.html

  • 13
    Smith John
    Posted February 8, 2013 at 7:01 am | Permalink

    As airport trtain demand increasese, which is of course desirable, what happens when we bump up against the fact that the trains are already full of Campbelltown passengers?

    Because of that interconnection, planning airport rail capacity is intimately connected to planning the second harbour rail crossing.

    The Campbelltown trains could be sent via Sydenham, and the airport line could be run as a reasonably dedicated, adequate capacity short line with a terminus at somewhere like Kingsgrove (ie inner south, a short way beyond the airport) – EXCEPT for the fact that both lines must still use the same track on the city circle.

    The second harbour rail crossing is needed not least to create separate lines from city circle to Sydenham-Cambelltown & from North West Rail link to airport-Kingsrove (or perhaps Revesby). **

    Airport/ Kingsgrove effectively becomes the near-city terminus of the NWRL. As well as adding capacity to the airport this will improve reliability (as compared with existing Campbelltown trains which must do a complete round trip through the city circle before getting any significant recovery time).

    ** The government’s current proposal is to link the NWRL via the second harbour crossing to the Bankstown and Hurstville lines rather than the airport. The reason for this is not quite clear, but appears to be lnked to the stupid idea that Sydney’s train lines should be divided into separate ‘metro’ and heavy rail groups – NWRL-Bankstown-Hurstville becoming one of the ‘metro’ lines

    But the airport is a much more important activity centre than Bankstown or Hurstville, so it’s more useful to link the NWRL to the airport to provide through service from the north shore for air travellers and airport workers.

  • 14
    JRAPQQ
    Posted February 8, 2013 at 10:17 am | Permalink

    Yes it is a fast way to travel between Airport and City, the trains and stations are (generally) revolting and certainly not luggage friendly. If the operators wish to encourage travelers they can “fare-milk”, how about a high one-way or single journey return fares and low price weekly tickets. Like the rest of Sydney Airport it’s yet another manifestation of pathetic governments (read Politicians – irrespective of Party).

  • 15
    fractious
    Posted February 8, 2013 at 5:10 pm | Permalink

    “Should the O’Farrell government lower Sydney airport rail fares?”
    A couple of days ago, I travelled from Campbelltown to Revesby by train. It was a weekday, the train from C’town left about 8.30am and was announced as a City via Airport service.

    It was a <A HREF="http://www.cityrail.info/about/fleet/c_sets"C-set with fixed plastic-covered seats, no air-con and the carriage I was in stank.

    I’ve lived in Sydney for more than two decades, so I’m used to it. But I sometimes wonder what first-time tourists to Sydney must think when one of these noisy, noisome mobile toilets turns up at the International airport stop, especially given the exorbitant fare they’ve just paid.

  • 16
    Socrates
    Posted February 9, 2013 at 10:01 am | Permalink

    Regardless of the validity of the agruments to remove the access fee, the government is certain to keep it. Falling property sales and retailing mean falling GST and stamp duty revenue. So State governments are desperate for cash all over Australia. NSW is certain to keep the cash.

    Continuing development in the Green Square area and adjacent suburbs south of the Sydney CBD means patronage on the airport line will continue to climb. Track capacity into the Sydney CBD is already problematic, hence the LRT project. NSW would be in no hurry to get a large mode share change here.

  • 17
    Krammer56
    Posted February 10, 2013 at 9:26 pm | Permalink

    This discussion is the real reason why Governments don’t do tollways or fare surcharges well. The politics intrudes on any sensible discussion.
    Whatever the right answer, some party will one day promise to remove the surcharge, just like the toll on the West Gate Bridge and Bob Carr’s promise to remove tolls from the M4 and M5 (which he subsequently found out was too expensive to do, so reneged).
    If the toll had been kept on the West Gate Bridge, a back of envelope calculation based on a 1985 toll of 50c rising at CPI and traffic growth of 3% p.a. (it has been much higher) indicates Victoria would have collected about $600m in real dollars (or $1.1-1.2B in today’s dollars) since 1985.
    This money could have been used for all sorts of projects, including perhaps investing in improved rail alternatives.

  • 18
    Dudley Horscroft
    Posted February 28, 2013 at 12:48 am | Permalink

    Is an increase in modal share from 16% to 17% a “spectacular growth in patronage”?

    And is it true “that the capital cost of the rail line has been recovered”? (If so, must be the only one in NSW!)

    If the true cost of a rail journey is said to be on average $10.01 how can charging $15.90 or $16.70 be justified when this trip is, after all, a very short distance trip, where the true cost would be more likely in the range $5.00 to $10.00? Ligically one should cut the surcharge to about $5.00.

    If you really want to save money, take the route 400 bus from the Domestic or International terminals to Banksia railway station in the west and then take the train, or to Botany Road in the east, and then catch an M20 bus, which will take you to the City with several suitable stop locations, and then over the Bridge to North Sydney and Gore Hill (which the Airport train will not do).

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