LTA to move SBS Transit, SMRT bus services into 11 packages worth S$7.2b

SINGAPORE'S Land Transport Authority (LTA) has negotiated to contract bus services from SBS Transit and SMRT for a total sum of about S$7.2 billion.

The contract sums, of which three quarters will go to SBS Transit, are paid by LTA to run the 273 bus services. They were reached through negotiations with the operators, said LTA in a release on Thursday evening after trading closed.

As a result, these bus services will be re-organised into 11 packages starting Sept 1. SBS Transit will operate eight packages with 196 services at S$5.322 billion while SMRT Buses will operate three with 77 services at S$1.865 billion. The contracts are of durations ranging from two to 10 years.

The packages are of varying sizes, and have different compositions of bus services with different route lengths.

When these negotiated contracts expire, they will also be put out for competitive tendering.

This latest move by LTA will see the bus industry fully transitioning to the bus contracting model. Under this model, LTA will own all operating assets including buses and lease them to the operators. This allows LTA to respond to changes in ridership in a more timely manner, said the authority.

However, the bus services to be contracted out come Sept 1 will require no transfer of assets. "As there is no change in operators for the bus services and infrastructure in these 11 packages, no handover of assets is needed. Existing bus employees will not be affected," said LTA.

There remain about 4,000 buses that are owned by SBS Transit and SMRT Buses at the moment.

During the tenures of these negotiated contracts, LTA will lease these buses from the operators by paying an availability fee that is equivalent to the depreciation value of the buses. The financial cost of this is the same as buying over the buses now at net book value, said LTA.

SBS Transit and SMRT are still expected to operate, manage and maintain the buses and their on-board equipment; do likewise for depots, interchanges and terminals; and charge and collect fares on behalf of the government.

Two other bus packages have already been tendered out. The Bulim package started service in May 2016, and is operated by Tower Transit. The Loyang package will start in September 2016, and will be run by Go-ahead Singapore. Another package, called Seletar package, was put out for tender in June, and service will commence in first half of 2018.

Shares of ComfortDelGro, the parent company of SBS Transit, were down by 1.02 per cent, or three Singapore cents, to close on Thursday at S$2.92 apiece.

SMRT shares were flat at S$1.635. It issued a release saying that it welcomed LTA's move.