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COVID-19: Global Transport Revenue Model Transition

May 19, 2020

Lockdowns to control the spread of the virus have led to a reduction in farebox revenues of over 90% during the COVID-19 crisis.

The requirement to maintain social distancing, ongoing travel restrictions and public concerns about the safety of mass transit mean that agencies can expect significant revenue shortfalls to continue. The impact of this has already been seen in London, where Transport for London has required a £1.6bn bailout to continue operating, and similar funding crises can be expected around the world in the coming months.

Innovative solutions are needed to revolutionise the funding of urban transit networks. Even before the crisis, transit systems in the US only covered 46% of their operating costs from farebox revenue, and the disruption from ride sharing and new forms of transport was increasing that pressure further. Without fundamental reform, transit networks risk becoming unaffordable for the cities they serve. The answer to this cannot come from simply increasing fares, which will put greater pressure on ridership and limit the role which mass transit can play in driving the economic and social revival of our cities.

CEOs of transit agencies must be bold to address the funding crisis and make radical changes to support the transition to a new, sustainable revenue model. This new model will come from embracing different user payment models, more effective partnerships to develop third party revenue streams and changing the nature of engagement with local and national government. This should be linked with a much more ambitious strategy to monetise the access to and insight about their customer base. These new strategies will offer a path to not only recover revenues to pre-COVID levels, but could provide a roadmap to achieving full financial sustainability for urban transit systems.

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The views and opinions in these articles are solely of the authors and do not necessarily reflect those of Teneo. They are offered to stimulate thought and discussion and not as legal, financial, accounting, tax or other professional advice or counsel.

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