Economies of scale in bus transit: A review of concepts and evidence

The issue of returns of scale in bus transit continues to be a subject of debate among transportation analysts. From a public policy perspective, returns to scale are relevant to many policy areas such as transit service pricing, cost allocation, productivity and organization of the industry. Empirical studies conducted during the past decade have generated conflicting results. Constant, decreasing and increasing returns to scale have all been reported.This paper identifies the sources of these conflicting results: confusion regarding the concept of scale economies, variable definition, assumptions regarding the shape of the cost function, and certain characteristics of the data base. The paper also discusses the theoretical concept of scale economies, and an interpretation of the concept for bus transit is presented. It is concluded that recent studies which have utilized generalized cost functions more accurately represent the economic structure of bus transit, and provide a stronger basis for transit policy analysis.     

Estimation of urban bus transit marginal cost without cost data

We develop a method to study the industrial structure of urban bus transit without using cost data. To do so, we estimate the marginal cost function under the assumption that firms compete on frequency and adjust frequency to maximize profits. Our methodology is applied to Santiago, Chile. In this case, demand is modeled with a simplified model of transit network assignment. The goal is to consider how frequency, capacity, and on-board passengers affect the bus line’s demand. The marginal cost function is estimated by using the first-order conditions of the firm’s profit maximization problem, using the results of the demand model as data. We conclude that the urban bus transit industry in Santiago exhibits increasing returns to scale for low levels of demand and that these returns are exhausted rapidly at a moderate demand level. Additionally, firms exhibit economies of network expansion, on average.     

Direct to your destination: the size,scope and competitive status of express coach carriers in the United States

The advent of express coach bus lines offering guaranteed seating and emphasizing curbside pickup and drop-off is contributing to a revival in intercity bus travel in the United States. Relatively little is known, however, about the scale and geographic scope of these carriers or the competitive landscape in which they operate. To fill this void, this study evaluates the service networks operated by the two largest express coach operators in the country, BoltBus and Megabus, and evaluates a data set of 4775 fares sold on megabus.com. The results show that these carriers cumulatively serve 127 intercity segments and operate about 52.9 million bus miles per year. Together, these carriers have grown to about one third of the size of Amtrak, with Megabus and BoltBus providing 3.3 billion and .69 billion seat miles of service, respectively, compared to Amtrak’s 12.8 billion. With respect to the types of routes it serves and the competition it faces, Megabus has evolved into a carrier quite different than Boltbus; more than one third of Megabus’ bus miles are operated on segments without Amtrak service, while virtually all of BoltBus’ miles face this competition. The analysis of Megabus’ pricing shows that fares rise modestly within 2 weeks of departure, while the per-mile costs are much less ($.08/mile) for 300–399 mile trips than for those 50–99 miles ($.22/mile). Nevertheless, the dispersion of fares tends to fall as the departure date nears, regardless of distance. Together, these prominent bus lines serve 66 of the 100 most heavily traveled U.S. city pairs that have characteristics suitable for intercity bus service—which is more than Amtrak. With further growth on the horizon, planners, federal regulators, and researchers should collaborate on establishing reporting requirements for this expanding sector.

     

Estimating the inefficiency in the Norwegian bus industry from stochastic cost frontier models

A stochastic cost frontier function based on data from 170 of the 175 Norwegian subsidized bus companies is estimated under two alternative presumptions regarding the distribution of the inefficency among the bus operators. When the inefficiency is assumed to be half-normally distributed, the average inefficiency in the industry is estimated to be 13.7 per cent. This calculated value is nearly halved (7.2 per cent) when the exponential distribution is applied, while the ranking of the companies according to inefficiency is unchanged. By regressing the estimated inefficiency values for each company on some exogenous variables describing its ownership structure and the subsidy policy which it faces, it is seen that inefficiency of the companies which negotiate with the public authorities over the subsidy amounts is slightly higher than the inefficiency of the companies which face a subsidy policy based on cost norms. Our analysis gives, however, no significant differences in the efficiency between privately owned bus companies and publicly owned bus operators, and shows only minor economies of scale.     

A comparative life-cycle energy and emissions analysis for intercity passenger transportation in the U.S. by aviation,intercity bus,and automobile

Intercity passenger trips constitute a significant source of energy consumption, greenhouse gas emissions, and criteria pollutant emissions. The most commonly used city-to-city modes in the United States include aircraft, intercity bus, and automobile. This study applies state-of-the-practice models to assess life-cycle fuel consumption and pollutant emissions for intercity trips via aircraft, intercity bus, and automobile. The analyses compare the fuel and emissions impacts of different travel mode scenarios for intercity trips ranging from 200 to 1600 km. Because these modes operate differently with respect to engine technology, fuel type, and vehicle capacity, the modeling techniques and modeling boundaries vary significantly across modes. For aviation systems, much of the energy and emissions are associated with auxiliary equipment activities, infrastructure power supply, and terminal activities, in addition to the vehicle operations between origin/destination. Furthermore, one should not ignore the embodied energy and initial emissions from the manufacturing of the vehicles, and the construction of airports, bus stations, highways and parking lots. Passenger loading factors and travel distances also significantly influence fuel and emissions results on a per-traveler basis. The results show intercity bus is generally the most fuel-efficient mode and produced the lowest per-passenger-trip emissions for the entire range of trip distances examined. Aviation is not a fuel-efficient mode for short trips (<500 km), primarily due to the large energy impacts associated with takeoff and landing, and to some extent from the emissions of ground support equipment associated with any trip distance. However, aviation is more energy efficient and produces less emissions per-passenger-trip than low-occupancy automobiles for trip distances longer than 700–800 km. This study will help inform policy makers and transportation system operators about how differently each intercity system perform across all activities, and provides a basis for future policies designed to encourage mode shifts by range of service. The estimation procedures used in this study can serve as a reference for future analyses of transportation scenarios.     

Acquisition,efficiency and scale economies: An analysis of the British bus industry

The British Bus industry has undergone considerable transformation since privatization. Five major operators have emerged to dominate the market, a position almost exclusively attained through acquisition. This paper reviews the economies of scale argument commonly cited for this change and gives an overview of the acquisition process. It questions whether this argument gives a complete explanation for this industry development. For 58 individual companies, the level of technical efficiency attributable to firms operating at or near the optimum level of output is examined over 5 years to determine if mergers in practice have resulted in scale economies. Technical efficiency is estimated using data envelopment analysis, under assumptions of constant and variable returns to scale. Efficiency scores are then regressed on a time trend and a merger dummy to test whether acquired firms' efficiency has significantly improved above the average. It was found that over the period, efficiency had improved. This improvement, however, cannot be wholly attributed to the achievement of economies of scale. More specifically, there has been an improvement in the internal efficiency of acquired firms and some scale economies within group companies, the latter of which may have resulted from the eradication of competition.     

Evaluating efficiency in the Norwegian bus industry using data envelopment analysis

This paper focuses on the performance of Norwegian bus companies subsidized by the government. The performance is evaluated from a productive efficiency point of view. The framework is that of a deterministic non-parametric Data Envelopment Analysis (DEA) approach to efficiency measurement. In this context several important issues are addressed: efficiency rankings, distribution and scale properties in the bus industry, potentials for efficiency improvements in the sector, the impact of ownership, area of operation and scope, and ways of improving efficiency in the sector. The findings show that the average bus company exhibits increasing return to scale in production of its services. The extent of such returns however vary, with size and is more prevalent among smaller companies. The average bus company is found to have a considerable input saving potential of about 28 percent. Neither economies of scope nor company ownership are found to have an influence on company performance. It is suggested that geographical factors need a closer attention in future research. The implications of DEA results are discussed and concluding remarks offered.     

Evolution of public transit modes in a commuter corridor

This paper explores how the selection of public transit modes can be optimized over a planning horizon. This conceptual analysis sacrifices geographic detail in order to better highlight the relations among important factors. First, a set of static models is proposed to identify which type of service, e.g., bus only, rail only, or bus and rail, is the most cost-effective in terms of the average trip cost for given demand. After analyzing essential factors in a long-term planning process, e.g., economies of scale in rail extension and future cost discounting, a dynamic model incorporating such considerations is formulated to optimize the decision over a planning horizon. While analytical solutions can be obtained for some decision variables, the final model is solved with a graphical method by exploring the tradeoffs between the initial and recurring costs. Major findings from this study include: (a) there exists a minimum economic length for a rail line, which can be determined numerically; (b) economies of scale favor large extensions and excess supplied capacity; (c) the rail-only service is largely dominated by the feeder-trunk service, even in the long run.     

An exploration of the competitive relationship between intercity transport systems

A suitable model that enables the analysis of dynamic relationships between transport systems is important for managers to make real-time reaction strategies. This study proposes an autoregressive distributed lag modeling approach that can point a way to interpret the long- and short-term relationships between intercity transport systems. To test the applicability of the approach with regard to evaluating the dynamic competitive relationships between intercity transport systems, an empirical study sample is adopted in evaluating competition between high-speed rail (HSR) and intercity bus services. The results indicate that HSR has a long-run impact on intercity bus transport and the intercity bus transport market is positively affected by its previous operations and negatively influenced by the previous performance of HSR. However, in the short-run, the current period performance of HSR positively affects the intercity bus transport market.     

Economies in U.S. demand responsive transit

This paper develops a neoclassical cost function for demand responsive transit (DRT) system and uses it to test the economies of scale hypothesis. The results show economies of scale and further show that the economies can be explained by speed, local and state subsidies, utilization of seating capacity, fleet utilization and an increase in the number of professionals. Comparison of DRT and bus transit results identifies patterns in policy variables whose effects on cost are the same across modes.     

Assessing the quality of intercity road transportation of passengers: An exploratory study in Brazil

In Brazil, buses represent the main mode of public transportation. However, in recent years intercity and interstate bus companies have been facing a growing competition with other forms of transportation such as bus companies competitors, illegal transportation companies, chartered buses, and, more recently, air companies. In this scenario characterized by growing competition, it is essential to evaluate the quality of road transportation of passengers. In order to contribute to the analysis of this issue, this paper presents a methodological approach to assess the quality of intercity road transportation of passengers, according to the customers’ perspective. By conducting a case study in a city of almost 500,000 inhabitants from the interior of Rio de Janeiro, an Importance–Satisfaction Analysis (ISA) and an assignment procedure were used in order to obtain: (i) the main factors (criteria) that influence the quality of service intercity road transportation of passengers, (ii) the importance degree of criteria related to road transportation of passengers, (iii) the satisfaction of the users of road transportation under the considered criteria, (iv) the critical criteria/items, and (v) the categories which best represent the quality of service intercity road transportation according to the passengers’ perspective. Finally, several possible corrective actions to improve the quality of services considering each critical item/criterion were highlighted and special recommendations were done for the critical process (ticket sales).     

Multioutput analysis of cargo handling firms: An application to a Spanish port

Cargo handling in ports is a multioutput activity, as freight can arrive in many forms such as containers, bulk, rolling stock, or non-containerised general cargo. In this paper, the operation of cargo handling firms in a Spanish port is analysed through the estimation of a multioutput cost model that uses monthly data on three representative firms located at the Las Palmas port. This permits the calculation of product specific marginal costs, economies of scale (general and by firm) and economies of scope, which help identifying optimal pricing policies and the potential cost advantages of increasing production.     

Institutional structure of New Zealand licensed road freight carriers

Road freight transport in New Zealand has operated under government regulations since 1936, primarily to protect the freight revenue of the New Zealand Railways. In 1983 an Act was passed to deregulate the freight transport industry and to switch over to a qualitative licensing system. This is expected to have some impact on competition within the road freight industry as well as between road and rail. This paper analyses the institutional structure of the road freight industry at the pre‐deregulation phase. The trend over the last few years, shows that the number of single vehicle owners (mostly owner‐drivers) and their share in the industry is growing at a faster rate than others. The vehicle authority distribution varies widely from one region to another in the country. Economic factors like employment, population, urbanization etc. could not explain this variation. The segregation of demand by existing government regulations appears to be the main reason for such diversity in vehicle authority distribution. Apparently there is no monopoly trend in the aggregate nor in the regional distribution. However, many owner drivers work closely with large firms, which may change the concentration observed in the distribution of vehicle authorities.

Productivity is relatively high for one person operations, i.e., mainly owner drivers. It then goes down and then rises to a certain limit. This gives an indication of the possibility of economies of scale, the single vehicle firms being an exception.     

Demand for buses in Japanese medium sized cities

The number of bus passenger has been decreasing in Japan since 1969. The increase in car ownership and development in urban rapid rail network has deprived bus service of passengers. The bus industry has suffered from depression for the last twenty years. However, many bus routes are still operated commercially. The amount of external subsidies is not large. The industry is under strict regulation. The common way for bus operators has been to increase fares rapidly in order to keep their break even condition. The first half of the paper describes present circumstances of the bus industry in more details. Then the second half of the paper treats the estimation of the effect of each factor on bus demand by using pooled data in Japanese medium sized cities. The results suggest that the increase in car ownership has had a crucial effect on local public transport demand and is likely to continue to do so.     

In Search of the Link between Ship Size and Operations

Abstract

Since 1990s the liner shipping industry has faced a period of restructuring and consolidation, and been confronted with a continuing increase in container vessel scale. The impact of these changes is noticeable in trade patterns, cargo handling methods and shipping routes, in short ‘operations’. After listing factors influencing size, growth in container ship size is explained by economies of scale in deploying larger vessels. In order to quantify economies of scale, this paper uses the liner service cash flow model. A novelty in the model is the inclusion of +6000-20-foot Equivalent Unit (TEU) vessels and the distinction in costs between single and twin propeller units on ships. The results illustrate that scale economies have been – and will continue to be – the driving force behind the deployment of larger container vessels. The paper then assesses the link between ship size and operations, given current discussions about the increase in container vessel scale. It is found that (a) ship size and operations are linked; (b) optimal ship size depends on transport segment (deep-sea vs. short-sea shipping, SSS), terminal type (transhipment terminals vs. other terminals), trade lane (East-West vs. North-South trades) and technology; and (c) a ship optimal for one trade can be suboptimal for another.     

User charges,cross-subsidization,and public subsidy—The case of expressways in Japan

In Japan, the construction of the intercity expressway network is presently underway. The scale and layout of the network were determined not only in accordance with the forecast of traffic volume, but also from the viewpoint of equal opportunity. To enable as many people as possible to enjoy the service of high-speed transport, a pool system of revenues and costs (plus a uniform toll rate system) has been adopted for all intercity expressway routes. The costs of each route are covered by tolls paid by its users, cross-subsidization from other routes, and public funds. Recently, a system has been officially proposed by which, in cases where the construction of an unprofitable route is planned to attain the policy objectives, the upper limit of cross-subsidization is quantitatively fixed from the standpoint of equity and the need and scale of public subsidies are determined according to this. Commercial and economic cross-subsidization may be wasteful in terms of efficiency. Moreover, it is essential to distinguish the function and the role of cross-subsidization during the stage of network formation from those for the subsequent stages of its maintenance and management.     

Consequences of public ownership and subsidies for mass transit: Evidence from case studies and regression analysis

The trend toward public ownership, public regulation, and public subsidization of the U.S. transit industry has recently come under attack. Many argue that the result has been reduced productivity, increased costs, and very little real benefit. This article examines the impacts of subsidies and public ownership in four large transit systems that cover a range of transit system types and financing arrangements. Evidence from the case studies is compared to the results of both time-series and cross-section regression analysis of operating and financial statistics for large samples of bus systems. Although the case studies and the regressions rely on different datasets and different techniques, they support the same conclusions. Increased subsidies and public ownership have kept down fares and permitted service expansion, but have also encouraged wasteful cost escalation. Thus, transit riders unquestionably have benefited from public takeovers of transit systems and burgeoning subsidies, but not nearly as much as they would have benefited if costs had not skyrocketed at the same time.     

Passengers’ Perceived Service Quality of City Buses in Taipei: Scale Development and Measurement

Abstract

To understand fully passengers’ perceptions and expectations of the bus service quality in Taipei, business managers and governmental agencies must seek a proper scale that can reflect passengers’ opinions accurately. This study develops and tests a service quality scale designed for a city bus transit system in Taipei. Churchill’s paradigm and a focus group interview were combined into a multistage scale development procedure. Based on the procedure, Taipei city buses were selected as the example, for which a service quality scale was developed. The final scale contains four dimensions and 20 items. These four dimensions are ‘interaction with passengers’, ‘tangible service equipment’, ‘convenience of service’ and ‘operating management support’. Finally, the results of scale development and the managerial applications of the service quality scale for the city transit system are discussed.     

Marseilles integrated transport system

To be fully effective, metro lines must be connected with other modes of transport. This principle has been applied in the city of Marseilles, France. First, a very good interchange between the two metro lines and the national and suburban railway has been developed in the Saint-Charles main railway station. This interchange connects with the adjacent intercity bus terminal. Second, at every metro station, access facilities and neighborhood development were planned. Third, bus stations and car parks were installed at main rail stations. All this was made possible by early coordinated planning.