Consolidating small operators
If bus services in the city are provided by a large number of small operators, they must be replaced with fewer, larger operators. Each replacement should be big enough to operate an entire route, in the case of a route contract system. Or all routes in an area, in the case of an area contract system.
Basically, there are two ways that this might be achieved:
- Eliminate all existing operators, and introduce new operators to replace them.
- Consolidate the existing operators into larger units.
There might be a combination of both, with some new operators entering the market, some of the existing operators amalgamating, and others leaving the market.
An immediate outright prohibition of existing operators may be effective in certain circumstances, but normally would not be acceptable. The livelihood of hundreds or thousands of people is involved.
Smaller operators evolving into larger operators
New companies may be formed that would purchase the assets of all existing operators, and offer employment to all employees. These may include a large number of owners, who also drive their own vehicles.
Small informal operators may be encouraged to combine into more formalized groups, and to pool their resources to invest in fewer, but larger, vehicles to operate a conventional bus service.
They might delegate the management of their vehicles to a co-operative. The government might assist, for example through the provision of soft loans to purchase vehicles, or training in operating procedures where appropriate.
Smaller operators evolving into shareholders
Existing owners might become shareholders in a limited liability company by exchanging their vehicles for shares to the market value of their vehicles. Owners could be given the choice of becoming employees of the new company, or investors taking no active part in its operations. But in either case they would receive a share of the company’s profit in the form of a dividend proportionate to the value of their shares.
Even when vehicles are sold or scrapped, shareholdings would remain intact and the former owners would continue to receive dividends. It should also be possible to encourage the development of larger operating units by making it attractive for individuals or organizations to invest substantial sums in fleets of buses, either through buying out existing owners, investing in new buses, or both.
This would require long term security in terms of revenue and other conditions. In other words a stable regulatory system and a fares policy that would enable an adequate return to be earned on the investment.
A practical approach to existing owners
Whatever changes are made, the future of the existing owners and their vehicles must be taken into account. Whatever steps are taken must be acceptable to the owners themselves, as well as to the authorities and the traveling public.
Otherwise, disgruntled vehicle owners are likely to take action to sabotage the introduction and operation of the new bus services in order to protect their livelihoods.
Owners should not suffer any undue financial losses as a result of the changes. But the authorities should not incur unnecessary costs, such as substantial compensation awards.
Other key issues to consider
Changes in industry structure
Increasing the number of operators
Forming operators’ associations
Creating a level playing field