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1996/97 STATE TRANSIT ANNUAL REPORT
Chairman & Chief Executive's Report



1996/97 was another successful year for State Transit with increased patronage and improved services to the community.

That State Transit remained self-sufficient this year was a significant achievement, with the introduction of the sales tax regime, an increase in third party insurance and increases in depreciation charges from a revaluation of assets adding $20.8 million to its costs. Management and staff must be congratulated for controlling other expenses and boosting revenue through patronage growth.

Growth continued for the fourth successive year and outstripped Sydney's population growth, demonstrating that State Transit is being successful in attracting the private motor vehicle user to public transport. Total patronage increased by 3.3% to almost 210 million trips, fleet capacity increased by 5.8% and staffing grew by 4.9%. Fleet and staff levels grew faster than total patronage because of the need to meet a 5% increase in peak period travel. In fact, core bus service patronage in Sydney increased by 5.7% and ferry patronage was up 2.5%. In Newcastle, a 6 month trial of time-based ticketing was very successful, with patronage on core services increasing by 4.7% in what has been a shrinking market for some years. Due to this success, we subsequently confirmed time-based ticketing as the standard for the Newcastle area.

State Transit's highest service priority is the safety and security of its staff and passengers. Incidents are few and far between given the number of trips provided (over 15,000 per day) but they are, nevertheless cause for concern and we commenced a number of initiatives to improve safety and minimise the risk of future incidents.

Clearly, State Transit operates within a slender margin of profitability, the result of fare-setting processes that do not recoup real costs. Because of this, a spotlight is now being placed on the organisation's costs of operation. The Independent Pricing and Regulatory Tribunal with the Department of Transport have started a review of the cost of bus operations. This will be completed by the end of the year and we expect it will provide a firm basis for future fare determinations.

It is expected that the review will take into account the costs borne by State Transit that are not recognised by other operators; these include the costs of providing accessible transport services, estimated at $2-3 million in 1996/97 (State Transit being the only NSW operator, so far, that has recognised its obligation under the Disability Discrimination Act 1992 and set about providing accessible services) and the costs of owning and maintaining infrastructure. No other bus or ferry operator is required to fund infrastructure and the State Transit Board considers that this principle should also apply to State Transit. The costs of maintaining infrastructure are estimated at close to $2 million per annum - a significant drain on revenue that should be spent on improving services.

1996/97 net profit before abnormals

  • With infrastructure costs $1.1 million

  • Without infrastructure costs $2.8 million

Looking forward, a number of other challenges face us over the next five years, including the introduction of a new commercially benchmarked contracting system and preparation for the Olympics. Within its means, State Transit will continue to pursue growth in public transport usage and to maintain profitability whilst bearing down on costs in order to reduce Government outlays on CSO payments. However, it should be noted that State Transit's fares were held below private sector levels again in 1996/97 after the Independent Pricing and Regulatory Tribunal recommended aggregate fare increases less than the Consumer Price Index. The Government currently supplements these lower fares to the level of commercial private sector charges and it might be noted that, if State Transit's fares were set at private sector levels, the Government would no longer have to underwrite them and, as a result, would save some $25 million per annum.

Notwithstanding these challenges, State Transit's outlook is positive. We will purchase more buses and ferries to service growth in the market, our profitability will improve as the money spent on new services starts to make returns and we will continue to attract private motor vehicle users to public transport. Growth, however, will have a short term cost as profitability is reduced by re-investment of earnings in the business - purchasing new buses, increasing service frequencies and developing new services. Such re-investment still adds value to the business however, and the community will see returns on this in the long term.

To ensure sustained growth in 1997/98 we will continue to promote bus priority measures because higher speeds attract patronage and lower our costs through reduced fuel use and increased asset and staff utilisation. The diagram below demonstrates the relationship between cost and speed.

Cost/Speed Graph Bus priority measures will attract large numbers of commuters to public transport and we will continue working with local councils and the Roads and Traffic Authority to expand and increase the effectiveness of existing measures.

Finally, State Transit is a growing organisation and the plans for the future ensure a positive outlook for both employees and customers. We would like to thank the NSW Public Transport Authority for its support and commitment to improving integration of services, ticketing and improved public transport.

Above all, we would like to thank management and staff for their ongoing commitment to State Transit's growing business and look forward to working with them to continue the success next year.


DAVID HERLIHY JOHN STOTT
CHAIRMAN CHIEF EXECUTIVE



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