08S7B trailblazers

FOUR MONTHS AFTER FARE HIKE

FOUR MONTHS AFTER FARE HIKE
Cabbies' earnings up despite initial fears
Ridership also up as commuters return to taking taxis
By Maria Almenoar

THE chorus of complaints that came from the taxi industry after fares were raised in December last year seems to have died down.
Although some customers initially stayed away from taxis, there has been a turnaround, and with it fears that the earnings of cabbies would drop seem to have eased, according to surveys done by the country's two biggest taxi companies.
ComfortDelgro, the largest taxi operator here with about 15,000 of the country's 24,000 taxis, saw a 16 per cent increase in takings for a cabby's full day of work.
For a full-day shift, cabbies are earning $187.92, up from $162 before the fare revision, after deducting the cost of fuel and renting the cab.
SMRT, which has about 3,000 cabs on the road, said cabbies saw a 20 per cent increase in gross income in the first quarter of this year, compared with the last quarter of last year.
The data came from a survey of about 300 taxi drivers.
In a bid to alleviate a taxi shortage and raise the drivers' earnings, the six taxi companies increased their starting metered fare from $2.50 to $2.80 in December.
The meter was also adjusted to tick faster, with 20 cents charged for every 385m up to 10km travelled, instead of 10 cents for every 210m.
However, commuters were most peeved by a revised peak-hour surcharge which was tweaked from a flat $2 to 35 per cent of the metered fare. The surcharge for picking up passengers in the city centre also went up from $1 to $3.
After first avoiding taxis in favour of public transport, more commuters seem to be going back to them.
The average daily ridership for taxis for January was 855,000 while February's went up to 934,000.
Last year, the average daily ridership was 945,000.
Said 55-year-old cabby Haniff Mahbob, who has been on the job for 20 years: 'After fares went up, we had few customers. But luckily the new fares offset our lost business. Now, business is definitely picking up. I'm sure more drivers have bigger smiles on their faces.'
Call bookings are also on the rise this year, according to ComfortDelgro.
The company will also soon offer a service which allows passengers to book a cab by sending an SMS message with their postal code and pick-up location.
The Taxi Operators' Associations, which represents drivers' associations of five of the six taxi companies, said: 'The situation seems to have stabilised and improved, but we are still quite concerned that rising fuel cost may eat into our drivers' income.'
Oil prices hit a record US$117.50 (S$160) a barrel this week.
On average, taxi drivers on a full-day shift spend close to $40 on diesel and about $90 on cab rental.




ANALYSIS

In mid-December last year, the taxi company’s pricing policies incurred a lot of panicking and complaints. Yet the policy came with good reasons.

Ever rising cost of fuel adds on the cost of operation for the taxi drivers. Their income dwindled. As a result, fewer were willing to take passengers and this led to a shortage of cabs especially in the night. Proliferating surcharges and selective taking of passengers distorted pricing mechanism and caused great inconvenience for the commuters.

These reasons have been discussed in detail in ILP by some groups. The focus of this article will be on the reaction of the commuters towards the fare hike, both in short run and long run. The article will also analyse the objects of the pricing policy and if they have been met.

The hike in price is mainly intended to raise income of taxi drivers. It also aims to improve proficiency of taxi service.
In the short run, the number of commuters decreases from 945,000 to 855,000 due to the increase in price.
The demand is price elastic for lower-income people and people who do not mind taking bus or MRT instead of taxis. People may be forced back to other means of transportation. Some may even consider buying their own cars. The fare hike affects especially the people who take taxis regularly before the hike.
However, for some people, taxi service is a necessity. For example some people would take only taxis to work everyday due to convenience and comfort a taxi ride could provide. Their demand for the taxi service is inelastic. This is especially so for some middle- and upper-income people because the increase in fare only takes up a small portion of their income.
The higher fare turned taxis into a boutique service, not supermarket-type socialized commuting. The main riders are business people and shoppers whose demand for taxis is likely to be inelastic as business people find taxis efficient and shoppers are unwilling to carry goods. Therefore the demand for taxis is generally inelastic.
This is evidenced by the fact that taxi drivers’ earnings have risen by up to 20 percent, despite fewer passengers. Lost business has been offset by higher fare.
As mentioned in the newspaper article, the demand for taxis bounced back from 855,000 to 934,000. Given time, consumers have gradually adjusted their pattern of consumption and become more acceptant of higher taxi fare especially with inflation looming in the price of almost everything. What is more important, with a satisfactory income taxi drivers provide a more satisfactory service. The riders spend less time on waiting for taxis coming and there is no longer proliferation of surcharges. Some commuters who were initially scared off by the hiking fare started to turn back to taxis for its convenience.
Therefore the policy alleviated the shortage of taxis and raised drivers’ income. The quality of the service and reputation of the profession have been improved through a higher price. Both objects of the pricing policy have been met. It benefits both the drivers and the commuters who really need the service.
So far the pricing policy has been a success.

posted by Yiqing @ 4:55 PM