Estimated mode shares of rail links at world airports (source: Transportation Associates)

A ticket between the CBD and Melbourne Airport on the privately owned SkyBus currently costs $19.00 one way. If the airport were part of the city’s myki system it would cost just $4.10. At the city end, that $4.10 would give free transfer to other modes for a total period of two hours.

Following on from my recent listing of the key issues around airport rail, I’m taking a closer look at whether fares for a new Melbourne Airport rail line should be subsidised so that (say) they align with the myki tariff (see What are the key issues for Melbourne Airport rail?).

The maximum fare that could be levied will depend on a range of factors, including travel time, market segment, level of service, interchange, destination, price of alternative modes, and more. This should all be assessed in light of estimated construction and operating costs prior to the decision to build. But even if it’s privately owned, there’s still the option – if there are commensurate benefits – of subsidising fares.

On the evidence I’ve seen to date, I lean to the non-subsidy side (see here and here); here are some matters to consider:

  • The lowest cost rail option is likely to require $3 Billion to construct. Rather than subsidise airport travellers, at least some of that expenditure and all operating costs could be recouped through fares and applied to other public priorities, e.g. improving outer suburban public transport.
  • Charging airport travellers a premium fare is common for airport connections in Australia and worldwide. For example, the one-way fares on the privately owned rail lines in Brisbane and Sydney are around $17.00 to $18.00.
  • A premium fare more closely reflects the real costs of providing the service.
  • Travellers using Melbourne Airport already pay $19 one-way on SkyBus. It’s the status quo and hasn’t generated widespread community opposition.
  • Business travellers aren’t price sensitive and can afford to pay the real cost; they’re more sensitive to travel and waiting time.
  • Tourists aren’t especially price sensitive either and are used to paying premium fares for airport connections. Victorian taxpayers don’t subsidise their flight, so there’s no evident reason why they should subsidise their ground travel.
  • Most Melbourne residents only travel occasionally by air and see the fare premium as a small component of a larger expenditure. They’re willing to pay; it’s not regarded as the impost it would be if it applied (say) to daily commutes.
  • There’s a strong case for aligning fares for airport workers with the myki tariff, but that doesn’t require subsidising all fares. Note though that public transport’s share of workers is still likely to remain very low (more than 95% of airport workers currently commute by car).
  • Equity isn’t the issue here it is with metro travel because flying is a luxury good. The impact on very low income travellers should be addressed directly via targeted income support and aimed at the total trip cost, most of which is the air ticket.
  • If the train were privately owned and operated as is the case in Sydney and Brisbane, some of the benefit of subsidised fares might (inevitably?) accrue to the owner rather than travellers.
  • A lower fare would make the train more attractive relative to driving, but it wouldn’t ameliorate congestion on the motorway system. Latent demand for a range of trip purposes (not just airport travel) would quickly fill road space made available by motorists who shift to rail.
  • The impact of fares on mode share is relatively modest. This analysis of a train service to Western Sydney airport estimates Opal aligned fares would capture 22% – 24% of CBD and Parramatta travellers, whereas a fare similar to Sydney Airport’s would capture 18% – 20%. Access to lower Uber fares has a bigger impact.
  • The primary reason most Melbourne residents don’t use SkyBus and won’t use the train to get to the airport isn’t because of the fare; it’s because they live in dispersed locations that make private cars/taxis the most attractive choice. Achieving a very high mode share for rail (in Brisbane it’s <10%; in Sydney <20%) would require policies that limit the utility of driving for travellers and ‘meeters & greeters’ e.g. airport entry toll, pricing motorways, higher parking charges, higher taxi/Uber fares.

The question of whether fares should be subsidised could equally be asked of the current SkyBus operation. It costs taxpayers nothing, so providing a multi-Billion subsidy for airport train users – many of whom are visitors or on business – is a big ask when that money could be used for other socially important purposes that directly benefit Victorian taxpayers. The external benefits of a large subsidy don’t appear that compelling.

I’m open to contrary arguments, but my view is build the line when demand justifies it and price it to recover operating costs and as much of the capital costs as possible. The way to tackle traffic congestion around the airport and reduce kilometres of car travel is to manage demand e.g. price road space.

Update 6/10/17: another justification for setting fares at a commercial rate is business travellers – who are likely to account for the largest part of the benefits in the BCA – are prepared to pay taxi fares and in most cases already do. A large proportion of those business travellers are visitors to Victoria.

See other recent articles on the subject of airport mass transit links: