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What is a fair fare?

by Eric Wolf, AMTRAN General Manager

Monday, June 4, 2007 | Categories:

There has been a lot of discussion around fare increases from the state legislature as well as from the Transportation Funding and Reform Commission. I’d like to talk a little about our new fares in Altoona.

“We’ll pay more.”

A comment we heard from some of our customers at the public hearings was that they were willing to pay more if it would save their bus. Unfortunately since less than 30% of AMTRAN’s expenses are covered through the farebox, this is not very realistic.

(If 30% doesn’t seem like very much, let me point out that most highways cover 0% of their expenses. The exceptions are tollbased roads like the Pennsylvania Turnpike which is now fighting to maintain its very existence.)

But that’s not the only reason that AMTRAN tried to approach fare increases with caution.

Price Elasticity

Economic theory (and common sense) state that as prices go up, demand goes down. This is particularly true with bus fares. Since our customers are generally from the lower end of the economic scale, they are very sensitive to price increases, so much so that the last two fare increases at AMTRAN actually reduced ridership so much that there was no overall increase in revenue. So what was the point?

We ultimately decided to increase fares gradually over the next five years (5 cents each year) to have the least impact on our customers and the best impact on our revenue stream.

Apples & Oranges

We heard a lot of “A 5 cent fare increase is not enough. The people who use this service need to pay more.”

Yet the same folks who make that statement are incensed at the mere mention of a 5 cent increase in the gas tax to improve our state’s roads and bridges. Increase the gas tax? How did you feel when you read that? You’re against it, right? What if it were to go up 5 cents each year for the next five years? Even worse, right?

So what we’re saying is that we have to protect the people who drive on our highways from paying 5 cents more, but paying 5 cents more isn’t enough for the people who ride the bus even if many of them are poor, elderly, or disabled.

When you look at it that way, it doesn’t sound very fair, does it?