This post looks at three bus companies which have very similar characteristics, albeit different sizes:
- each operates as a monopoly on an island and so there is no ‘contamination’ from outside their zones of operations; and
- the companies in question focus solely on interurban routes and so, in terms of costs per bus-kilometre, we should expect to see little difference.
What we see instead are three very different sets of costs, with the highest (Tenerife) being over 50% higher per bus-kilometre than the lowest (Lanzarote). We would expect a priori that Tenerife and Gran Canaria would have lower costs due to economies of scale considerations, but this is clearly not the case. By far the largest difference between the three companies arises from personnel costs; although in Gran Canaria, average staff costs appear excessive, each member of staff is highly productive in terms of number of bus-kms per person when compared to Tenerife.
Note also that Lanzarote has the only company whose revenue exceeds its operating costs. In 2016, Intercity Lanzarote managed an average of €1.70 per bus kilometre so will probably be subsidy-free for the year.
Although Lanzarote’s company appears to be the most financially robust, it also serves the needs of its residents less, with the number of trips per person lower than on the other two islands. To make matters worse, a regression analysis based on the number of residents and tourists over a 15 year period suggests that, whilst tourists take the bus a (hypothetical) 25 times per annum on average, residents use the service only 10 times per annum. To put this figure into context, the municipal company operating services in Las Palmas de Gran Canaria achieves some 88 trips per person per annum and, at the other end of the scale, municipal busses in Arrecife (Lanzarote) manage a pitiful annual trip rate of 6.
In 2016, almost 75% of all journeys in Lanzarote were achieved on just three lines which cater principally for tourists, a significantly higher concentration than in 2012 (69%). So, to what extent is the Lanzarote company making money at the expense of the social welfare of its residents?