Forward thinking: the need for a new public transport business model

12 April 2013

For pan-European projects like the European Bus System of the Future to succeed, a new public transport business model is required, backed by the gamut of industry stakeholders. Urban Transport Agenda talks to UITP secretary-general Alain Flausch about the challenge of doubling market share by 2025.

In the run-up to the 60th UITP World Congress and Mobility and City Transport Exhibition in Geneva in May, secretary-general Alain Flausch knows that among all the discussions, networking and keynotes, the underlying objective is to create a business model that will double the market share of public transport by 2025.

Easier said than done, but in order to gain any meaningful momentum, changing or modifying the existing model is key.

"One of the things we're afraid of is that we continue to be kind of a strange industry where we are depending so much on public money and not thinking in a business way," says Flausch.

"We still need public money because there's no way to finance major infrastructure without the public involved, but we need to be in a position to look like a normal industry that is able to attract a client base and investors."

The idea is to revisit the business model and make sure more people in the industry are ready to take a proactive approach, rather than relying on public money.

"That is the real motivation right now," says Flausch. "It's in the interest of the greater public transport community, which isn't so aligned in terms of a new business model. What we want is the message to be brave and ambitious, to start building a real business instead of just begging for public money."

Attracting investors

But the real work of stoking interest in a bolstered business case is ensuring that private parties see attractive returns. With this in mind, the UITP's approach was to send people into the investment community to collate opinions on strengths and weaknesses in order to work on partnerships. Once weaknesses viewed from the investment side are identified, risks can be mitigated or eliminated entirely.

"We want to be very practical, but to change the business culture, company governance, contractual obligations and company commitments need to be addressed," explains Flausch.

"Now is the time to be ambitious and if we have more entrepreneurial-type people involved, there will be better quality of service and better success."

There will be certain aspects that bankers and investors don't like, of course. Another challenge is working on internal governance, where the role of competition is limited, and once the contract is finished, parties have to execute in a way that leaves the most room for manoeuvre.

"First, you have a contract that sets real goals with real commitments on both parts, with no way for political authorities to intervene, or at least methods in place to protect the company from interventions," explains Flausch.

"I'm afraid that the political world will want to dominate and if it does, it would kill the business. I think there is a kind of balance. In the 1990s, everybody on the political side thought it was better to rely on the private world, but then factors like the banking crisis happened and then they came out and said, 'We know better'.

"We may waste years if they take back control and in ten years they'll see that it doesn't work and then go back the other way. Now is the time to be ambitious and if we have more entrepreneurial-type people involved, there will be better quality of service and better success."

Once there is a consensus, however, the 2025 deadline for the new business model is still viewed as a motivational symbol rather than a realistic target, as Flausch explains.

"Of course it's not realistic," he says of the deadline. "But don't worry. It's a kind of stimulus for the industry and I feel that many people are using it as an objective to proceed. Now, whether they will make it or not to 2025 is not important, but you see that a country like Sweden is thinking of it as a national motto, while Geneva is doing it on the regional side, so it's a tool more than anything."

The EBSF project

A large part of the 2025 plan is to revitalise urban bus transportation through the UITP's €26 million European Bus System of the Future (EBSF) initiative, the result of four years of intensive research aimed at developing a new generation of urban bus systems adapted to the specific needs of European cities, and improving the perception of bus transport.

Around the world, roughly 80% of passengers on public transport travel by bus, but Europe is still lagging behind.

"The bus has always been viewed on the continent as the second-ranked mode of transportation," says Flausch. "It's silly, because a light-rail or metro system is only needed when you have a high-density population.

"The bus still has a long and good future, and we want to upgrade that future, to make the bus better than it is viewed today - more comfortable and more attractive in terms of quality of service, look and design. It's a complete overhaul, including the infrastructure of the bus stops, lanes and consumption of the buses."

"It's time to do something. It's the whole bus system that needs to be revived to help restore the market share of public transport."

Although 2025 might not be realistic on a wide scale, in terms of the EBSF there is an urgent need for results as the European bus industry continues to suffer in very difficult market conditions. Foreign markets such as China are also developing large manufacturing capacities; in order to hold onto some of the bus manufacturing industry in Europe, Flausch believes that prompt action is necessary.

"It's time to do something," he says. "It's hard to keep an edge in such competition, and it's the whole bus system that needs to be revived to help restore the market share of public transport."

In addition to the bus system, half the battle is changing public perception and convincing people that this is a preferred way to get around. Success cannot be achieved unless a range of goals is met, including planning, the lanes designated to buses and ensuring they are fast enough to compete with cars.

If the buses don't work but look good, it's not going to be sufficient to make the case for public transport. Cooperation, therefore, is paramount, but based on the scale of the EBSF, there hasn't yet been a lot of agreement among manufacturers on certain topics.

"They play their own game with their buses and stick up for innovations that would fit with their own strategies," Flausch says. "It's still in development. They're still not giving anything away because the competition is so fierce, but this is the first time they are willing to play together, so that is a big step."

City trials and electrification

Despite manufacturer agendas, there have been promising advancements in test cities such as Budapest, Gothenburg, Madrid, Paris and Rome. "They are very happy," says Flausch. "It requires a lot of money, but it's
seen as a great investment with great prospects for returns and there is good momentum. So the next projects are viewed as continuations and successes for the industry.

"They're glad to upgrade the bus as one of the most efficient and cost-effective modes of transportation. They can hardly refuse. I think there is momentum right now."

"Some are very excited about electricity and think it's the way of the future, others aren't."

"One area of ongoing debate, however, concerns plans to build a new electrification network for buses. Some industry players are very enthusiastic about it, while others, such as Volvo, which is more involved with hybrids, are less favourable. There is progress, but some industry stakeholders are still wondering what the best way forward is, so, again, consensus is unlikely.

"Some are very excited about electricity and think it's the way of the future," adds Flausch. "Others aren't and that's their strategy, and I can't comment on that. But I'm not sure if they are right."

But at least it's opening up dialogue and, despite so many bus initiatives arriving a little late to the party, there is pressure from the EU to forge ahead with funding for a big project. Flausch, however, remains sceptical.

"The first part will be to make an inventory of what already exists, which is far beyond what they're doing," he notes. "So, on the basis of that inventory, they may want to develop what is perceived to be the most feasible, promising route. But I'm not sure if Europe is at the forefront of this, or has the capability to do it."

Thinking forward
Alain Flausch was voted secretary of the International Association of Public Transport in 2011.

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