FARE RESTRUCTURING EXECUTIVE REPORT

Date : 27 October 2010

1. Most urban railway systems in the world are not financially viable, but are
implemented for their socio-economic benefits. Our Manila Light Rail Transit
(LRT) systems promote the use of high-occupancy vehicles, thereby reducing
traffic congestion on the corridors served, local air pollution and greenhouse
gases emissions. Besides the substantial savings in travel time cost of LRT
riders, the LRT systems reduce infrastructure investment in Metro Manila road
expansion.

2. In keeping with international experience, railway costs are covered by

passenger fares, government subsidies and, to a certain degree, by
commercial development at stations and advertisement. Compared with urban
railway lines in neighboring countries, our LRT lines are not generating
substantial revenues from commercial development and advertisement. More
importantly, the farebox ratios 1 of the three LRT lines are projected to fall
below 1.0, thus requiring greater government subsidies to cover operating and
maintenance (O&M) costs.

3. With the last LRT fare increase in 2003 and road-based public transport
modes allowed substantial fare hikes, the LRT fares have fallen below the
fare levels of Metro Manila buses (regular and air-conditioned services) as
shown in Table 1. End-to-end fares of our LRT lines are even lower than
jeepney fares (Table 2).

Table 1: Comparison of Average Passenger Fares, P/passenger

Ave Trip LRT Jeepney Metro Bus Metro Bus AUV/FX
Length, (Regular) (Air-con)
km
LRT 1 8.00* 14.20 11.20 14.55 17.60 20.00
LRT 2 8.08 13.51 11.31 14.70 17.78 20.00
MRT 3 8.61 12.30 12.05 15.68 18.94 20.00
Average 8.25 13.35 11.55 15.01 18.15 20.00
* Projected average trip length for LRT 1 with opening of Roosevelt Station

Table 2: Comparison of LRT End-to-End Passenger Fares, P/passenger

LRT Line LRT Jeepney Metro Bus Metro Bus AUV/FX
Length, (Regular) (Air-con)
km
LRT 1 13.96 15.00 19.54 25.58 30.71 40.00
LRT 2 12.49 15.00 17.49 22.86 27.48 40.00
MRT 3 16.50 15.00 23.10 30.28 36.30 40.00

4. Keeping the LRT fares at their current levels would increase the total
government subsidy from P13.85 billion in 2010 to P17.06 billion in 2011
(Table 3).

1
Proportion of the fare revenues to the total operating and maintenance expenses
Table 3: Government Subsidy Level by LRT Line, P/passenger
2010 2011 (forecast)
Annual Full-Cost Gov’t Annual Full-Cost Gov’t
Ridership, Fare Subsidy Ridership, Fare Subsidy
million million
LRT 1 160.81 35.77 21.57 177.51 47.36 33.16
LRT 2 64.56 60.75 47.24 67.14 59.08 45.57
MRT 3 153.70 60.03 47.73 155.73 64.38 52.08
Total
Subsidy, 13.85 17.06
P Billion

5. The proposed LRT fare adjustment is expected to result in:

• Optimized ridership and revenue leading to the reduction in wear-and-tear
of LRT/MRT systems/facilities and postponing the required capacity
expansion (additional trains);
• Improved fare revenue to at least cover the O&M expenses thus reducing
the government subsidies to the LRT lines and cross-subsidies to Metro
Manila commuters by all taxpayers;
• LRT fund reserves for rail service improvements to increase train
frequency and reliability, minimize waiting lines at ticket booths and gates,
improve passenger facilities/amenities, etc.;
• Reallocation of government resources to other priority infrastructure and
social services projects; and
• Send clear signal to private sector investors that regulatory risks will be
minimized in future public-private partnership projects.

6. Three LRT fare options were established to approximate the prevailing fare of
air-conditioned buses, namely: P9 (boarding fee) + P1 per kilometer; P10
(boarding fee) + P1 per kilometer; and P11 (boarding fee) + P1 per kilometer.
The P10 + 1 option will bring the LRT fare close to air-conditioned bus fares
(Table 4).

Table 4: Comparison of LRT Fare Options with Metro Manila Bus Fares,
P/passenger
Current LRT Fare Options Regular Air-con
LRT Fare P9+1.0/km P10+1.0/km P11+1.0/km Bus Fare Bus Fare
LRT 1 14.20 17.00 18.00 19.00 14.55 17.60
LRT 2 13.51 17.08 18.08 19.08 14.70 17.78
MRT 3 12.30 17.61 18.61 19.61 15.68 18.94
Average 13.35 17.25 18.25 19.25 15.01 18.15

7. The LRT fare adjustment will generate additional income for the three lines
ranging from a minimum of P1.56 billion (P9+1 option) to P2.36 billion (P11+1
option). Table 5 presents the estimated reduction in government subsidies for
each fare option.

2
Table 5: Reduction in Government Subsidy by CY 2011, P Billion
Subsidy without Reduction in Subsidy
Fare P9+1.0/km P10+1.0/km P11+1.0/km
Adjustment
LRT 1 5.89 0.49 0.67 0.85
LRT 2 3.06 0.24 0.31 0.37
MRT 3 8.11* 0.83 0.98 1.14
Total 17.06 1.56 1.96 2.36
Note: Projected increase in MRT 3 subsidy over and above the P 7.2 billion allocated in DOTC
Proposed CY 2011 budget

8. The maximum average increase in passenger fares is estimated at 44.2%

(from average fare of P13.35 to P19.25 under the P11+1 option). Table 6
shows the average increase of fares by LRT line.

Table 6: Average Fare Increase by LRT Line

Average Fare Increase, P/passenger % Increase/passenger
P9+1/km P10+1/km P11+1/km P9+1/km P10+1/km P11+1/km
LRT 1 2.80 3.80 4.80 19.7% 26.7% 33.8%
LRT 2 3.57 4.57 5.57 26.4% 33.8% 41.2%
MRT 3 5.31 6.31 7.31 43.2% 51.3% 59.4%
Average 3.90 4.90 5.90 29.3% 36.8% 44.2%

9. Based on the profile of LRT passengers, the impact of the LRT fare
adjustment will affect the most the following passenger groups:
• Minimum wage earners, which account for about 8 to 9% of the total daily
LRT passengers; and
• Students who are not granted fare discounts on LRT lines.

Minimum wage earners will likely shift to cheaper alternative modes such as
jeepneys and regular buses. On the other hand, the impact on students,
particularly those taking the LRT Line 2 (Recto-Aurora Line) through the
University Belt areas, could be eased by the grant of 15-20% fare discounts.

10. While MRT Line 3 (EDSA Line) passengers will be obliged to pay more from
their current average LRT fare of P12.30 per passenger, they are expected to
afford the increase in fare with their average personal monthly income of
P13,560 or 1.5 times the minimum wage in Metro Manila.

11. The recommended LRT fare structure is P11 (boarding fee) + P1 per
kilometer. Stakeholders’ inputs/recommendations during the public
consultation should be considered prior to the implementation of LRT fare
adjustment.

DOTC-LRTA Study Team