by Professor Stuart Cole CBE FCILT, Emeritus Professor of Transport (Economics and Policy), University of South Wales

Except for essential jobs in the NHS and transport in its widest sense – buses, trains, supply chains / production capacity especially for medicines, food and hygiene products, Covid-19 is keeping most of Wales’ population at home. However, maintaining a degree of public transport is vital for those essential workers.

Wales’ railway network, vital to our economy,  is managed through four franchises whose current financial reality is one where many costs – train leasing charges, wages and depot overheads – remain much the same but where demand and revenue has fallen to between 15% - 20% of normal levels. 

To ensure continue train operation, Welsh Government has provided rail funding (and free travel for NHS staff) through TfW though the franchise’s infrastructure element makes this more complex. England’s Department for Transport (DfT) has created Emergency Measures Agreements (EMA) taking over the revenue and cost risks from the companies and providing a 2% management fee based on their pre-virus revenue.  

Both approaches are cheaper than operators entering insolvency or TfW / DfT becoming ‘Operator of Last Resort’ and nationalising the company; and at considerably less disruption for passengers. 

The position in Wales’ bus industry is not so secure. The deregulated bus market is competition based and intrinsically unstable. It does not enable Transport for Wales (TfW) or local council to take over a bus company which is in a dire financial position consequent on Covid-19. 

Bus company income derived from bus services, commercial private hire coach / school bus contracts and tour operations is down by 85%. TfW‘s over 60’s concessionary passes account for 50% - 60% of passengers but 75% of income much of which has disappeared along with student / pupil demand has vanished with university and school closures. The tours and private hire income especially in rural tourist areas is best between March and August, when the virus will hit most, with very little in October onwards.

Some costs however change little – bus depreciation / leasing charges, engineering / maintenance of vehicles ready for when demand returns, and depot overheads. Fuel and some insurance costs will be reduced.

The real threat to both UK wide and local bus companies survival is cash flow and financial sustainability over the next few months may not be possible.

A medium sized Welsh bus company, with 100 buses, and a weekly operating cost of £50,000 could reduce fuel / insurance expenditure (£2,500) by putting seventy-five per cent of the fleet onto the SORN system. An 85% fall in weekly revenue to £8,000 with a cost figure (after the wages allowance) of £12,000 gives an annual loss of £200,000. 

To reduce the loss Welsh Government will continue to pay bus services grant and concessionary fares subsidy based on forecast levels (paid subject to free travel for NHS staff; restructured timetables; under 50% passenger loadings) and is funding local councils to pay 75% of predicted school bus (one expects until September) and local bus subsidy costs. The UK government wages grant from May will help retain trained staff. However company farebox revenue is not being replaced so companies may still face losses (an estimated £100,000 above) every time a bus leaves the depot and could close their garage doors this week but still face continuing overhead costs. 

Welsh Government has set up loan arrangements with Banc Cymru (the Development Bank) and the UK government with the commercial banks. But loans have to be repaid, with interest. 

Bus companies have to reduce frequencies urgently but the applications volume is beyond the capacity of the Wales Traffic Commissioners office; the DfT should now suspend this requirement to enable bus companies to restructure their services to serve NHS and other essential staff.

Rural Wales has lost four important bus companies in recent years; we cannot afford to lose more. Ironically the Bus Services Bill currently before the Senedd enables local authorities to set up bus companies but not because of the virus.

And while the companies’ present position is being helped, the Government must use the Bus Services Bill to establish partnership or franchising (which this column has consistently supported) based bus authorities to replace current bus deregulation so ensuring services in rural and urban Wales can be guaranteed. 

This will involve integrating national (TrawsCymru) and local bus networks, the TfW rail network with national / zonal timetable and ticketing systems. Using experience from the TfW over 60’s concessionary pass and the Netherlands Chipkaart, public transport users will have a better planned and stable bus network – required in the current crisis. Welsh Government and local councils should now pursue this without delay.