Transit Services in a Competitive Market

Abstract

Since the new Hong Kong International Airport debuted on July 6, 1998, ground trips to the airport have undergone drastic changes. A number of transit modes are provided to connect the new airport with the territory, including three major ones—Airport Express Line (AEL), Air Bus (A-bus), and External Bus (E-bus). All of these transit services are operated by profit-driven businesses, dividing the 167,000 daily trips. Currently, the Hong Kong government imposes fare control on the bus services, whereas the rail service (e.g., AEL) is exempt from such control. The fare changes resulting from this competition were examined to assess their impacts on the traveling public as well as on each operator. In addition, an evaluation was made of the impact of deregulating this policy of fare control and allowing the operators to compete freely in a noncooperative manner. Transit services in a competitive market could lead to very different outcomes. For some districts, a transit operator could increase revenue by fare increases, whereas for other districts, revenue increase could be achieved only with fare reduction. Where and why competition falls into these different operating paradigms is an interesting topic for investigation. The methodology for this analysis, as well as the results based on actual data, is discussed.