Why Singapore's land transport sector is in dire need of fare hikes

Operating losses may continue.

According to OCBC Investment Research, ultimately, the government has to decide the balance between fare increases and the amount of subsidies to grant. Both PTOs are experiencing widening operating losses for their core SG bus operations as fares have failed to keep pace with operating expense increases and government subsidies are strictly profit-neutral.

"Either fares are allowed to increase to match the growth in operating expenses or further subsidies have to be given (i.e. no longer be profit neutral)," said OCBC.

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Fare review committee decision more important for near-term. The 13-member fare review committee convened last year has yet to reveal its
recommendations but the street has already priced in some level of increase. If the decision is delayed further, we could see continued losses for both PTOs and even asset impairments for SMRT.