Prasarana proposes cooperation and “code share” system for Klang Valley bus operators (Update #1)

Update: The response from bus operators & government is mixed!

Yesterday TRANSIT learned of a proposal from Prasarana, the government-owned “National Infrastructure Company” to introduce a cooperative system between bus operators, where bus operators would share information, operate routes together under “code sharing” agreements, and implement “blue ocean strategy” to rationalize their operations.

We were immediately surprised and intrigued by the possibilities … and wary of the risks.

The public transport industry in Malaysia is in crisis. Part of the reason for this is because there is no holistic understanding within the government and among the public of what public transport is (a public utility), what it does (stimulates and ensures productivity and economic growth), and what it provides (mobility and access).

Malaysia has no National Public Transport Strategy or any form of cohesive public transport strategy except for “build infrastructure” and “subsidize or buy out when necessary.” And we should mention that to many Malaysians both of those “strategies” have the unfortunate subtext of “enrich cronies.”

What makes things worse is that there is no clear interest in improving public transport services or approaching (and appreciating) public transport as a public utility with economic & social benefits. The public does not seem to be aware and the state & local governments did not seem to care.

Until the crisis started, that is.

Now state governments are being forced to take notice and ensure that there are solutions to the problems in the industry. Unfortunately, they do not have the knowledge, experience or the tools to ensure these solutions will work.

SPAD has asked state governments to do whatever they can to resolve the problems in the short term. The Governments of Penang and Negri Sembilan have stepped in with subsidies. Prasarana’s proposal for cooperation might represent an alternative way of doing things – but the big question is, Will private operators want to work with a government-owned asset-owner-cum-operator that receives capital & operational subsidy from the federal government and appears to be actively competing with private operators on any number of routes?

And more importantly, will corporate collaboration work effectively and meet the needs of the public transport users?

More information, articles & comments after the jump!

Bus operator Prasarana eyes code-sharing deal with competitors
Friday December 9, 2011

KUALA LUMPUR: Malaysia’s largest stage bus operator, Syarikat Prasarana Negara Bhd, would spearhead a strategic collaboration exercise with its competitors in a move similar to the code-sharing concept in the airline business and the ‘blue ocean strategy’ collaboration between Malaysian Police and the Armed Forces.

In a statement today, its group managing director, Datuk Shahril Mokhtar, said the move was not only in the best interest of all the bus companies for business sustainability but more importantly, would further improve the standard of public bus services in the Klang Valley.

[TRANSIT: But would it make the service and the companies accountable to the users?]

“Prasarana has already initiated discussions at both top and working levels with Setara Jaya Sdn Bhd and Syarikat Len Seng Sdn Bhd and it hopes to extend this collaboration with other bus companies in the Klang Valley,” he said.

[TRANSIT: Where is SPAD in all this?]

Shahril said although the parties involved had yet to work on the specifics and mechanisms of the strategic collaboration, the scope would include both operational and business aspects.

“On the operational aspect, we are looking at common scheduling and timetable, sharing of infrastructure and manpower, common operating hours for high- and low-density routes, standard fare structure, standard operating procedures and exchange of industrial knowledge,” he said.

[TRANSIT: Aren’t most of those to be determined by SPAD rather than by Prasarana? How will the public have an opportunity to give feedback if decisions are being made in corporate backrooms? You cannot have public transport service without the support of the public! Why does everyone forget this important detail?]

In terms of business collaboration, the parties aimed to work closely in areas of bus leasing, integration of ticketing system, route sharing, bus maintenance and shared engagement with the public, he said.

He said the collaboration of major bus operators in the Klang Valley would increase efficiency in the service and was in line with the government’s aspiration to encourage utilisation of public transportation.

[TRANSIT: What is needed here is not just industrial & corporate efficiency, but also improved accountability, responsibility, services that are also aligned with government and public objectives (rather than just corporate objectives) and above all, consultation & dialogue.]

Such collaboration, he said, would result in economies of scale in operations, including reduction in costs. “In terms of social benefit, there would be enhanced punctuality, trip frequency and reliability,” he said.

Currently, there are 14 stage bus operators in the Klang Valley including Prasarana’s RapidKL, which is the largest operator in terms of fleet size and operational coverage.

With a total of 1,488 buses, RapidKL’s network covers 166 routes and 980 housing areas. It also operates RapidPenang. – BERNAMA

Bus companies to work together for better service

Saturday December 10, 2011

KUALA LUMPUR: Hundreds of thousands of bus commuters in the Klang Valley can expect reliable bus service in high and low density routes once the various stage bus operators start sharing buses, passengers and routes.

[TRANSIT: Not without accountability!]

Syarikat Prasarana Negara Berhad has already started talks with two stage bus companies in the Klang Valley to work together and share infrastructure, manpower and provide a standard fare structure to increase punctuality, trip frequency and reliability.

Prasarana group managing director Datuk Shahril Mokhtar said this collaboration would be similar to the code-sharing concept in the airline business and the “blue ocean strategy” collaboration between the Malaysian police and armed forces.

“We have initiated discussions at both top and working levels with Setara Jaya Sdn Bhd and Syarikat Len Seng Sdn Bhd, and we hope to extend this collaboration to other bus companies in Klang Valley.

“In terms of social benefit, there would be enhanced punctuality, trip frequency and reliability. We will project a better image of the industry and effectively encourage high utilisation of public transportation,” Shahril said in a statement yesterday.

At present, there are 14 stage bus operators in Klang Valley including RapidKL, which is the largest operator in terms of fleet size and operational coverage.

With a total of 1,488 buses, RapidKL’s network covers 166 routes and 980 housing areas.

Currently, the bus ridership in the Klang is about 240,000 commuters per day and this figure is expected to increase to 600,000 by 2012.

He said the proposed collaboration would also boost economic activity in many areas.

“The present public transportation industry faces tough economic circumstances regulated fare structure and increasing operational costs. It’s vital that we undergo a transformation process for survival and for the betterment of the business.”

[TRANSIT: We acknowledge that public transport is a vital part of the economy. But believe us when we say that the problems within the industry that Sharil Mokhtar is describing are not the only problems that the industry is facing. Those are just the problems that the operators are facing.]

While acknowledging that the parties involved have yet to work on the specifics and mechanism of the strategic collaboration, Shahril said the scope would include both operational aspects and business collaboration.

“On the operational aspects, we are looking at areas of common scheduling and time-table, sharing of infrastructure and manpower, common operating hours for high and low density routes, standard fare structure, standard operating procedures and exchange of industrial knowledge.

“In terms of business collaboration, we aim to work closely on areas of bus leasing, integration of ticketing system, route sharing, bus maintenance and shared engagement with the public,” he said.

[TRANSIT: Will private operators want to work with a government-owned asset-owner-cum-operator that receives capital & operational subsidy from the federal government and appears to be actively competing with private operators on any number of routes?]

Shahril said the collaboration would increase efficiency and was in line with the government’s aspiration to encourage the use of public transportation.

He said the move was also only in the best interests of all existing bus companies.

[TRANSIT: But is it really in the best interests of all existing bus companies? What compromises is Shahril willing to provide to ensure that all bus operators are on a level playing field? For example, is Shahril willing to sell Prasarana’s stake in RapidKL Sdn. Bhd. & RapidPenang Sdn. Bhd. and turn them into publicly listed companies? Is he willing to give up the “Rapid” brand as mentioned in the Bus Transformation Plan?]

“As I see it, it’s definitely a win-win situation for all. Imagine the economic benefits: there are economies of scale in operations; operational costs will be reduced and we can cover a larger market.” – Bernama

TRANSIT Says:

We find Shahril Mokhtar’s collaboration and cooperation proposal to be very interesting. Our biggest problem is that it takes a one-sided approach to the problems in the industry and focuses only on the issues that the operators are facing, while facetiously promising that the quality of service will get better.

We disagree. Service quality will only improve with active efforts to improve service quality and standards. We already have seen that indirect attempts at improving service quality do not really work well. RapidKL introduced large numbers of shiny new buses in 2006-2008 but service quality actually got worse over time. Then the buses started to break down.

Even notorious bus company Metrobus has a mix of young and old buses, but service quality has always been poor.

TRANSIT’s point is simple – we cannot expect the industry to regulate itself or improve service quality by itself. Similarly, we cannot hope that cooperation in the industry will automatically lead to better service. The airline industry implemented code sharing of routes many decades ago, but costs are still rising and service levels are dropping.

Hence, we do not see that the effort to improve the sustainability of bus operations will automatically lead to better service quality.

At most, we can only see improvements to availability of service. This is a major detail, but at the same time it is only one of 6 important features of public transport service that will encourage users.

At worst, this cooperation may actually lead to the formation of an industry cartel, which could lead to price-fixing (which has already happened on the KL-Klang bus route), reduced service standards, lowered accountability, and increasingly poor operations. Ultimately, this could drive more people into private transport and hurt the public transport industry even more!

TRANSIT believes that there are long term solutions for the public transport industry but they must be part of a long-term strategy, they must include all stakeholders and they must be accountable and holistic.

A response from other stakeholders in the industry has already been received:

Some welcome Prasarana’s announcement, others ticked off (The Star)

11 December 2011

TRANSIT Says:

Cautious optimism is always nice but we still need stakeholders that care about the users’ interest. Look for our comments to come soon.