06.22.06
Luas in profit, or is it?
This story has been getting a lot of traction in the past 24 hours
“Dublin’s Luas light rail system returned an annual surplus in 2005 making it unique among State-run mass transit systems in Ireland and only one of a few worldwide which does not require an operating subsidy.
The success was attributed at the launch of the 2005 annual report yesterday to the ability of the trams to continue attracting large numbers of passengers outside of peak times and into the evenings and weekends.
The 2005 surplus of just €0.2 million, while small, allowed the Railway Procurement Agency, the developers of Luas, to inform Minister for Transport Martin Cullen that his planned €2.32 million subvention would not be required. Last year was the first full year of operation for both lines.
The figures contrast with annual subsidies of €25 million for Bus Éireann, €65 million for Dublin Bus and €180 million for Iarnród Éireann.”
I presume this surplus is calculated entirely on running costs, and doesn’t take into account the €700m?? it cost to build the thing. If one is handed a brand new piece of infrastructure with the best new trams and equipment then this takes a sizeable chunk out of the re-investment required in any business. I would also guess that the €180m for Iarnrod Eireann includes money for the purchase of new trains and the massive upgrading project taking place on several lines. As usual none of these issues are mentioned in the newspaper and radio reports. They just read out the press release….
Oops! Didn’t explain myself well here and some objections in the comments. I clarify further down…
Justin said,
June 22, 2006 at 9:21 pm
anyway — it’s hardly surprising it’s in profit. It’s unusably full most times I’ve tried to get it… there’s just waaay too much demand for the supply.
Dublin’s public transit systems are bursting at the seams, as far as I can see. I’m dreading what’ll happen as immigration increases and the current baby-boom grows up.
Billy Waters said,
June 22, 2006 at 9:36 pm
Well at least the thing runs all the time not like the buses or trains.
Luas is run for a profit and the buses and trains are run for the drivers. Half the buses in town are “As Serbhis” and God knows where they are going. You can’t depend on them to be going where you work or live and the unions run the show.
I must come accross as such a moaner but this place is ruined by vested interest after vested interest and there is very little will to do anything about it. Most people make their own arrangements and work around the system. Myself I am flying to Cork Ryanair tomorrow and getting Aircoach to the airport. Otherwise I would drive. Either way I am avoiding at all costs any state involvement in transportation.
ben said,
June 22, 2006 at 10:26 pm
They turn a profit in their first full year, ahead of schedule, and you are complaining that the word “annual surplus” means what it has always meant, and not what you think you might like it to mean in this particular context?
I know you’d rather tax revenues be used exclusively to reward wealthy people who have sheep, infants, and fallow land in large quantities, but Luas is an amazing success.
John of Dublin said,
June 22, 2006 at 11:44 pm
Sarah, yes it’s just operating profit. It’s not taking into account the massive construction costs which were over budget (surprise, surprise!).
However LUAS is likely to continue to be a good success in spite of some well documented negatives.
I just wish a private business-like passion and freedom could be injected into public projects by government agencies. I think of the various toll bridges and the profits.being milked privately.
Joe Drumgoole said,
June 23, 2006 at 8:14 am
If capital infrastructure projects were ever expected to make good their initial investment then we would have the private sector queuein up to invest. That is why this is a “government funded project”. All the pissers and moaners who said Luas was going to be an operational disaster can jump in lake.
Spanner said,
June 23, 2006 at 10:06 am
Ben,
I’m not sure that I agree re annual surplus. In most businesses the amortisation costs of capital expenditure projects are included in the calculation of quarterly and annual P&L.
That being said I am a fan of the Luas and I am delighted that thay are making an operating profit.
Spanner
Pete said,
June 23, 2006 at 10:21 am
Whichever way you look at it, the fact that Luas didn’t cost the taxpayer any money this year has to be a good thing.
boldeye said,
June 23, 2006 at 10:30 am
You haven’t attributed the quote but I think it’s from the Irish Times? If you had read the similar piece in the IT the day before (21 June) you would have seen the addendum: “Luas is not, however, repaying its construction costs of EUR 750 million.”
Given that the operation of Luas was outsourced, it wouldn’t quite make sense to include the cost of construction in the annual figures, I would have thought. Furthermore, though the cost of construction was significant, the network (limited as it may be at the moment) is nevertheless an asset in the hands of the government. Finally, does anyone realistically believe that CIE would have done a better job?
I’m no privitisation junkie, but found interesting yesterday Dublin Airport’s complaint that their increased charges aren’t high enough to fund development of the airport. What private companies pass on the charge of capital expenditure directly to customers by raising prices before capital investment? Does Coca Cola raise the price of a can of Coke before developing a new product line or building a new production factory?
The Luas has its flaws, but is still a tremendous success. The problem is that expansion will take a long time, but also that Irish people are consistently unwilling to accept any large expenditure, whether justified or not.
Colman said,
June 23, 2006 at 1:46 pm
The thing is that Coke would be able to borrow to fund the expenditure. I’m not sure how free a Dublin Airport that is in danger of privatisation is to borrow or that the government is willing to provide the capital for investment.
Luas is being subsided by government to the tune of (say) 21 million a year (if you assume a loan being paid interest only at 3%, which isn’t completely unreasonable for sovereign debt – start including capital repayments and things get much, much worse). I don’t have a problem with that, but let’s not pretend it’s otherwise.
(The problem with this sort of thing is that you either end up making awfully shallow comments or spending a day or two of your life doing the research journalists should have done before writing the stories…)
Sarah said,
June 24, 2006 at 1:06 pm
oh dear, few lines in support of Luas first I guess. It is brilliant. I have used it. And actually, I don’t really believe that public transport should even be required to make any profit. I’d be happy enough to see any of the buses/trains/luases etc run at a loss provided they were giving a great service. The “profit” is in getting people around efficiently and encouraging people to leave cars at home. (btw Billy why don’t you get the train to Cork? its only 2.5 hours and way easier to go to Heuston rather than a trek to the airport).
Anyway, my objection to the IT report was this: I felt they weren’t comparing like with like. It is great that it is doing so well and is making an operating profit. However, by adding in the subsidy to Dublin Bus and Iarnrod Eireann I wasn’t happy that THOSE figures were relating to “running” costs. AFAIK Dublin Bus are buying loads of new buses and Iarnrod Eireann are doing loads of upgrading. It just wasn’t a fair comparison and the deliberate suggestion was that privately run companies will inevitably make more money than publicly run ones. Perhaps in 5 years time (when they’ve ripped up the faulty pieces of rail and need to upgrade the trams) they might need to look for more money. Give it to them. But don’t slag off the other transport sectors because they need investment now. Oh and yes, I do know the unions make life difficult. But wow, I do feel sorry for Dublin Bus drivers. That is a hard job…
Darren said,
June 26, 2006 at 11:07 pm
All that success, despite having the ugliest seats in the known universe:
http://www.darrenbarefoot.com/archives/2004/09/photos-of-the-luas.html
Breaking Even on Rapid Light Transit | DarrenBarefoot.com said,
June 26, 2006 at 11:08 pm
[...] I was impressed to read last week on Sarah’s blog that Luas, Dublin’s newish light rapid transit system, turned a small profit in 2005: The 2005 surplus of just €0.2 million, while small, allowed the Railway Procurement Agency, the developers of Luas, to inform Minister for Transport Martin Cullen that his planned €2.32 million subvention would not be required. Last year was the first full year of operation for both lines. [...]
Light Rail SMACKDOWN: Dublin’s LUAS vs. SF MUNI’s T-Third « blog said,
November 24, 2007 at 4:20 am
[...] franchise agreement. Actual farebox recovery unavailable. Of course, report of an operating surplus does not subtract any sort of amortized capital construction [...]