Member of
1st International Workshop to Push
Forward Your Trolleybus System
Session 1:
Management of Costs and Financing
Presentation
Arnulf Schuchmann, Managing Partner
Salzburg, Austria
20 April 2006
Management of Costs and Financing
Content:
Content
 General overview of financing
regimes/principles
 Cost structures and mechanisms
 Differences between Trolley and Diesel-bus
Trolleybus
Working
Group
 Cost modelling and simulation
 Summary and conclusion
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
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© S2R Consulting 2006
Page 2
General overview of financing
principles/regimes
 Subsidies from General Tax Revenues
• most common form of financing public transport
infrastructure
Financing
principles/regimes
• Germany: part of tax imposed on gasoline and oil
products (in 2002 about 4%, 1,7 billion €), financing
of up to 65% of investments, complementary
subsidies from local governments
• Japan: "Railway Development Fund" since 1972,
financing of about 36% of construction cost for
railway infrastructure; central and local governments
also provide a subsidy by reimbursing interest
payments above 5% p.a.
Trolleybus
Working
Group
 Subsidies from earmarked Taxes
• dedicated to investments into public transport
infrastructure and to finance operating costs
Management of Costs
and Financing
• Norway: money from toll systems for investments
• France: "Versement Transport" as a special charge on
salaries (between 1% and 2,2%); imposition and
assignment is managed locally
for more details consult for example the special edition of Regionale Schienen 2006/I
Presentation
Salzburg, Austria
20 April 2006
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© S2R Consulting 2006
Page 3
General overview of financing
principles/regimes
 Value Capturing, absorption of enhancement in
value
• financial contribution of beneficiaries of public
Financing
principles/regimes
transport (particularly by increase of property value)
• Hongkong: extension of metro line 4
• prerequisites are difficult to establish: identification of
real beneficiaries, calculation of real enhancement in
value, legal and administrative framework
Trolleybus
Working
Group
 Government property tax revenues for companies
• Seoul: traffic tax on owners of commercial entities
that generate excessive commuting traffic
• Kobe: developers of land in station areas have to bear
part of rail construction costs and to allocate land for
rail use
• Tokyo: property owners share the costs for walkways
connecting stations to nearby buildings
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
P:/.../Contribution_Intern_Trolleybus_Salzburg_20042006_
for more details consult for example the special edition of Regionale Schienen 2006/I
© S2R Consulting 2006
Page 4
General overview of financing
principles/regimes
 Involvement of private investors (PPP)
• London: reinvestment and operations of metro
infrastructure for 30 years by private consortia
Financing
principles/regimes
• Rostock: BOT-model for Warnow-tunnel
• appropriate risk-sharing is essential for successful
PPP-models
Trolleybus
Working
Group
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
P:/.../Contribution_Intern_Trolleybus_Salzburg_20042006_
for more details consult for example the special edition of Regionale Schienen 2006/I
© S2R Consulting 2006
Page 5
Aim: To objectify the discussions on the
most cost effective bus-mode
 Comparison of cost structure and mechanisms of
trolleybus versus diesel-bus systems
 Based on experiences from project work and real figures
Cost structures and
mechanisms
• typically mixed systems (trolley- and diesel-bus)
• data from Austria, Germany and Switzerland
• in-depth analysis of cost and performance in order to
- identify cost saving potentials
- initiate restructuring processes
Trolleybus
Working
Group
- elaborate business strategies
- carry out due diligences for M&A-processes
- certify public subsidies as legally allowed
Cost model was developed
•
•
Management of Costs
and Financing
Presentation
to evaluate economic effectiveness
to indicate differences between bus-modes
Salzburg, Austria
20 April 2006
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© S2R Consulting 2006
Page 6
Costs are structured along the value
chain
Customer Management
driver costs
marketing & sales
training, education
ticket inspection
service clothing
information & safety
Traffic Management
Overhead
operational management,
planning, driving school , ...
commercial processes
depot management, disposition
management processes
...
traffic control
Infrastructure
stations
power supply & catenaries
buildings and depots
human resources
capital cost (depreciation, interest)
traction energy/diesel, lubricants
maintenance & daily services
external
labour
superior management of traffic
Trolleybus
Working
Group
Vehicles/Buses
Management of subcontracted Driving Services
subcontractor cost
Cost structures and
mechanisms
internal labour
Driver
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
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© S2R Consulting 2006
Page 7
While most of cost elements are equal,
some differ substantially
Total cost
index = 100%
Cost structures and
mechanisms
100
1%
7%
80
60
Overhead
Infrastructure
32%
26%
Customer Management
Traffic Management
Trolleybus
Working
Group
40
Vehicles/Buses
20
Drivers
• capital cost
0
• traction energy/
Diesel-bus
Trolleybus
diesel
• maintenance & daily
services
 detailed analysis of different cost elements
 evaluation of trade-offs
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
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© S2R Consulting 2006
Page 8
Trolleybuses should be used intensively
in order to gain economic advantages
Capital cost of vehicles
Capital cost
[1.000 €]
Cost structures and
mechanisms
80
index =
100%
Investment
70
"long lifetime"
60
Trolleybus
50
150
40
30
100
Diesel-bus
(lifetime=14 years)
20
engine, technology
10
Trolleybus
Working
Group
0
8 10 12 14 16 18 20 22 24 26 28 30
50
[€/km]
body, interior
0
lifetime [years]
3,0
Trolleybus
Diesel-bus Trolleybus
2,0
Management of Costs
and Financing
"heavy mileage"
Presentation
1,0
0,0
Salzburg, Austria
20 April 2006
Diesel-bus
0,1
0,3
0,5
0,7
0,9
1,1
1,3
1,5
accumulated mileage [mill km]
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Depending on lifetimes trade-offs within
vehicle cost are positive for trolleybuses
Vehicle cost - comparison
Vehicle cost
index =
100%
100
Capital and traction
energy cost
[1.000 €]
traction energy,
diesel
70
Trolleybus
50
40
Diesel-bus
30
capital cost
10
80.000
70.000
60.000
50.000
40.000
Trolleybus
30.000
Diesel-bus
10.000
0
0
0
Trolleybus
Working
Group
20
20.000
50
"intensive use"
80
60
maintenance &
daily services
Cost structures and
mechanisms
annual mileage [km]
 the more intensive the use of trolleybuses
the cheaper they are
 advantage in traction energy dominates
above threshold of approx. 55.000 km p.a.
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
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© S2R Consulting 2006
Page 10
Trolleybus systems profit from strong
development of diesel-price
Diesel-price development
[€/hl]
Cost structures and
mechanisms
100
80
60
40
Trolleybus
Working
Group
20
0
year
 the higher the diesel-price the better
economic situation for trolleybuses
 decreasing of diesel-price can not be
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
expected in future
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© S2R Consulting 2006
Page 11
Infrastructure investment has to be
justified by intensive use, also
Initial
investment
Total annual
cost
Share of
capital
overhead contact
wire system
250 K€ p. km
17,0 K€ p. km
78%
substation
430 K€ p.unit
23,6 K€ p. unit
82%
Trolleybus
infrastructure
index =
100%
 infrastructure =
110
100
Cost structures and
mechanisms
infrastructure
Trolleybus
Working
Group
predominantly fixed
costs
 vehicle and infra50
0
vehicles
Diesel-bus Trolleybus
structure cost are
strongly correlated
with the utilisation
of the system
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
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© S2R Consulting 2006
Page 12
For vehicle maintenance the situation is
still not clear
index =
100%
 specialized work
110
?
100
50
0
maintenance of
vehicles
forces for trolleybuses needed
Cost structures and
mechanisms
 since less than 100%
of maintenance work
depend on utilisation,
intensive use of
buses is meaningful
Trolleybus
Working
Group
Diesel-bus Trolleybus
 According to a new script of VDV (881) the trolleybus
needs more maintenance attention than a diesel-bus
 Looking at the robust traction technology of trolleybuses
Management of Costs
and Financing
Presentation
this may amaze someone
 Real project data draws no clear picture between diesel-
Salzburg, Austria
20 April 2006
and trolleybus
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© S2R Consulting 2006
Page 13
Looking at the cost mechanisms the
do's and don'ts are getting obvious
30 [Mill. €]
 trolleybus with higher
proportion of fixed costs
than diesel-bus
25
20
variable cost
15
0
fixed cost
0
20
40
60
80
100
120
140
service provided [index=100]
total cost
5,80
 hence, stronger effect on
fixed cost if services are
increased
10
5
[€/km]
 in case of tight schedule
and short headways, a
trolley-bus can realise its
advantages
to fuel prices the
economic situation gets
better for trolleybuses
5,60
5,50
5,40
75
80
85
90
Trolleybus
Working
Group
 particularly with regard
5,70
5,30
Cost structures and
mechanisms
Management of Costs
and Financing
"intensive use"
5,20
Presentation
5,10
Salzburg, Austria
20 April 2006
95
100
105
110
115
service provided [index=100]
120
125
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© S2R Consulting 2006
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Summary and conclusion
 Trolleybus systems are not necessarily more expensive
than diesel-bus systems
 A high utilisation in terms of services provided is
essential for competitive unit cost (€/km)
Summary and
conclusion
 By this the high proportion of fixed costs due to capital
costs of vehicles and infrastructure are distributed
 Cost advantage of a trolleybus system appears in traction
energy in particular
Trolleybus
Working
Group
 This will continue to be an advantage in future if dieselprices are increasing further
 From ecological point of view the trolleybus is the clear
favourite
 Additionally experiences show that trolleybus systems
generate more revenues due to higher ridership
("railway-bonus")
 Do not use diesel-buses driving under an existing
overhead wire system (trolleybus infrastructure), because
total costs of services will increase
Management of Costs
and Financing
Presentation
Salzburg, Austria
20 April 2006
P:/.../Contribution_Intern_Trolleybus_Salzburg_20042006_
© S2R Consulting 2006
Page 15
If you have any questions or if you would like
to receive further information, please do not
hesitate to contact us.
schuchmann@s2r-consulting.com
Trolleybus
Working
Group
www.s2r-consulting.com
S2R Consulting GmbH & Co. KG
Weidestrasse 120b
D – 22083 Hamburg
fon +49 (0)40 288 076 60
fax +49 (0)40 288 076 65
Management of Costs
and Financing
S2R Consulting GmbH
Dreikoenigstrasse 31a
CH – 8002 Zurich
fon +41 (0)44 208 32 10
fax +41 (0)44 208 35 00
Presentation
Salzburg, Austria
20 April 2006
P:/.../Contribution_Intern_Trolleybus_Salzburg_20042006_
© S2R Consulting 2006
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