Interview with Saw Phaik Hwa

Saw Phaik Hwa, CEO of SMRT speaks about the MRT service disruption.

Q. Analysts expect MRT ridership numbers to grow 7 percent in the 2009 financial year, so why are people switching from private cars and taxis to public transport?
Last year, we launched the ‘Go Green with SMRT’ promotion where we gave away free travel on SMRT trains and buses as prizes to encourage more people to choose public transport as a green mode of travel.
Our post-campaign studies showed that some of our customers switched from cars to public transport because they find it a cost-effective, eco-friendly option.
Last year’s spike in ridership numbers were the result of the 2007 taxi fare increase, and drivers switching from private cars to public transport due to higher costs of driving cars.

The shift in support of public transport is good for Singapore and for the environment, as it reduces congestion on the roads, cuts down pollution and allows people to travel more efficiently.

Q. SMRT added 700 trips in May 2008 to cut the waiting times for trains before and after peak hours. But shouldn’t SMRT be adding more trips in the peak times instead?
Currently, the 22 year-old system is being operated at its optimum level. During peak hours, the maximum number of trains are deployed for service at system-capable shortest frequency.

Even during off-peak hours we are running at optimum level with longer waiting times as we have to withdraw some trains to return to our depots for maintenance works so as to ensure system safety and reliability.

With the spike last year, the government and SMRT are working together closely to bring forward the improvement works to the system infrastructure and the purchase of new trains to improve frequency.

Q. In January 2008, SMRT was fined S$387,176 for a train service disruption between Pasir Ris and Tanah Merah that lasted for seven hours, so what happened and how did the disruption affected SMRT’s earnings?
The incident occurred during non-operation hours, while our staff were doing maintenance works.

We were extremely careful and meticulous in the retrieval of the damaged equipment, to prevent any damage to the track.

Our decision to take extreme care in the retrieval process which resulted in the seven-hour service stoppage was at the expense of a shorter recovery, as we did not want to compromise our system and the safety of our passengers.

In reviewing the incident we found that our procedures remain relevant and robust, and the incident occurred solely as a result of non-compliance by staff. We continue to seek improvements so as to deliver safe, efficient and affordable service.

Q. The Circle Line will open with stage 3 in the middle of 2009. But when will the project be finished?
Phase 3 of Circle Line will open 30 May, followed by Phrases 2, 1, 4 and 5. The other stages are at various stages of completion and will open from 2010 onwards.

Q. Analysts say that when the Circle Line is fully ramped up, after tax profit should increase by at least S$15 million? But don’t you think this is a bit of a stretch?
We are confident that the convenience of the Circle Line will draw more commuters.

Q. The Land Transport Authority will undertake centralised bus planning in 2009, so what will change and how will SMRT’s bus division be affected?
LTA’s central bus planning initiative will enhance bus services with optimal routing and eliminate duplication.

It will allow more operators to compete in the bus service sector. And it is a good opportunity to grow our bus business, which is currently limited to the North and North-West areas.

Q. How is SMRT dealing with the Ministry of Transport’s new operating standards, the liberalisation of bus routes and the construction of new lines?
The new initiatives open up a new world of possibilities for SMRT. Firstly, the metro system will double and SMRT is well-positioned to compete for these new lines as we have proven to be the most cost-efficient metro in the world while also delivering the best service standards.

Q. SMRT is planning to acquire China’s Zona Transportation, so what other plans does SMRT have for acquisitions and expansion?
In addition to our current negotiation to acquire Zona, we have also been successful as part of a consortium in winning a coveted 10-year media contract in late December 2008, to plan the advertising space, attend to design, operation and marketing of media services for the Dubai Metro.

Q. Analysts say that a two percent fare increase is expected to help SMRT mitigate the impact of rising operating costs. But are higher energy and staff costs grounds enough to allow SMRT to increase its fares by 2 percent?
As evidenced in the past year, SMRT as been focused on cost management while introducing innovative initiatives to increase income, by encouraging and incentivising an increase in ridership and growing revenue through the development of retail and media spaces.

We have been investing in improvements to our advertising and retail assets, to increase income from them.

Q. SMRT’s dividend policy suggests that it must pay at least 60 percent of net profit and at least maintain the level of dividend in absolute terms. The 2008 dividend payout was 6.25 cents, so what dividend payout do you think SMRT can support in 2009?
SMRT is committed to give fair returns to our shareholders.

Q. Analysts say that taxi fares will be increasingly priced as premium products and that taxi fares are set to be raised in the future instead of being lowered. So what do you have to say about that?
Taxis are premium, point-to-point transport service options for commuters.
Fares are an important factor to a drivers’ income and hence it would determine the viability of driving as a career. Successful drivers attract other drivers to the industry, and extremely low fares will not benefit commuters as there will be insufficient drivers interested to remain in the industry, compromising the availability of taxis to commuters.

Q. Newer taxi models are obviously in greater demand by drivers. So how successful has SMRT been in converting its existing drivers onto the newer taxi models which could potentially fetch higher rental rates?
Various taxi models serve different needs from the drivers and commuters’ point of view.

SMRT has been successfully opening up various niche markets as we have seen very strong responses to our Chrysler, Ssyanyong SPACE and SMRT Eco green taxis.