SINGAPORE — Transport operator SMRT yesterday warned of a bleak financial outlook ahead, as it called the current public transport business models “not sustainable” and predicted further losses in its bus business.

For the fourth quarter of FY2013 ending March 31, SMRT incurred a net loss of S$12 million, compared with a profit of S$13.9 million in the same period last year. The operator’s full-year profits also declined by 30.6 per cent to S$80.3 million, even though group revenue rose to S$1.1 billion — a 5.9 per cent increase from the previous financial year.

SMRT’s President and Chief Executive Desmond Kuek said that higher costs were incurred in the form of staff costs and the repair and maintenance costs for its rail network led to the group’s declining profitability.

SMRT’s Executive Vice-President and Chief Financial Officer Catherine Lee forecasted that the company’s “profitability will be further eroded in the next 12 months by the continuing misalignment between fares and operating costs”.

Calling the public transport business models “not sustainable”, Ms Lee said that stagnant fares will not be able to cover higher staff costs and depreciation “driven by higher service standards, a larger fleet and an ageing rail network”. For buses, SMRT said losses “will continue to increase”, as it foresees higher operating costs from higher energy and staff costs and “the need to replace and grow the fleet size to meet operational demands”.

Bus losses widened to S$30.8 million in the last financial year, from S$11.6 million due to higher operating expenses, in particular, the increase in staff costs from salary increment of bus captains, higher headcount and restructuring of drivers’ benefits.

To improve long-term viability, Mr Kuek said that “discussions are ongoing with the Government on more sustainable models for both the trains and bus business”.

Transport analysts TODAY spoke to suggested that the authorities relook how bus routes are tendered to ensure that there is a good mix of profitable and non-profitable bus routes to ensure sustainable operations.

While noting that there is “no one perfect model”, SIM University’s Head of Urban Transport Management programme Park Byung Joon said he preferred the “full operating subsidy model for buses” — which are already put into practice in cities like London and Seoul. Under this model, a regulator — in this case, the government — will set the routes and service standards, while private operators will be paid by mileage for providing the service.

However, Dr Park added that the downside of this model is the high costs to taxpayers as everything will be borne by the government.

This, he said, would be the price to pay for having a bus service which meets the standards of service consumers expect.