Jeremy Long offers timely insights from Hong Kong-based MTR, where he is chief executive officer, European business.

The recent McNulty report made clear the benefits that could be realised from greater integration of infrastructure and railway operations in the UK. MTR Corporation intends to participate in forthcoming franchise competitions in the UK – and to work with the Department for Transport and Network Rail to identify opportunities for MTR to bring its expertise and knowledge of integrated railway operations to the UK.

MTR, one of the world’s leading railways for safety, reliability, customer service and cost efficiency, is also a successful real estate developer publicly listed on the Hong Kong Stock Exchange with a market capitalisation of approximately £12bn. MTR designs, builds, operates and maintains the metro, commuter and Airport Express railway network with no government subsidy for its day-to-day operations. Funding is derived from the railway and non-fare box revenues, its property development activity, plus shopping malls and estate management businesses.

MTR carries over four million passenger per day (around 45% of all public transport trips in Hong Kong) on its 220km network of nine railway lines, which serve 84 stations, plus a 68-stop light rail network. MTR also provides 160kph intercity rail services from Kowloon to Guangzhou, Beijing and Shanghai.

MTR pursues continuous improvement to enhance passengers’ travel experience and service efficiency such that the network achieves 99.9% of passenger journeys delayed less five minutes or less with lines carrying up to 85,000 passengers per hour per direction.
MTR has successfully transferred its expertise at building, operating and maintaining railways around the world, with businesses now in Australia, Sweden, Mainland China, and the UK. In the UK, London Overground (50% owned by MTR) has significantly improved customer service and performance since taking over from the previous franchisee in 2007.

In Hong Kong, MTR operates as a fully integrated railway. Integration extends beyond operations, fleet, infrastructure and wheel/rail interface, into suppliers’ organisations through close partnering and risk sharing. In terms of revenue generation, MTR has developed expertise to maximise non-fare box revenues through design of station retail outlets and vending facilities, designing creative advertising media, easy access to shopping malls, residential and commercial developments plus seamless interchanges with other transport modes, all facilitated by the MTR-led, multi-modal-multi-operator automatic ticketing system, Octopus, that provides a highly convenient and low cost linkage between all key transport and retail needs of Hong Kong people.

As overall asset owner, MTR applies a whole life cost approach to its railway assets. This is rigorously assessed and controlled through MTR’s Asset Management Plan, Annual Works Plan and the Infrastructure Maintenance and Renewals Programmes. Control and knowledge of the asset, and accountability for performance is always retained by MTR, while contractors are engaged as a resource to achieve MTR’s objectives.

MTR’s expertise is in combining information from condition monitoring and condition surveys, together with its asset knowledge and its comprehensive asset database, to produce a regularly updated long term plan (MTR’s Asset Management Plan has a 40-year horizon). The length of its concession, at 50 years, enables a business case to be made for investments with long pay back times, e.g. retrofit platform screen doors; station air-conditioning upgrades; fleet modernisation; station upgrades; additional passenger subways and walkways; ATC replacement; etc. The Asset Management Plan has addressed a wide range of issues to reduce maintenance costs of track, rolling stock and structures while improving availability and reliability. The ability to consider how and where investment should be made across the total railway system allows MTR to optimise spending across the wheel/rail interface, MTR’s Asset Management Plan also ensures that MTR’s key objectives of enhancements in customer service, capacity, reliability and availability are delivered, to achieve increased patronage, non-fare revenues and sustainability, through investments in asset life extension and maintenance cost reduction plus better energy usage.

Control and maintenance of the civil structures, infrastructure and fleets is carried out 24/7 by the Operations Engineering Department, organised into 1st and 2nd line maintenance. Maintenance of all systems for managing services to passengers, or those that the public directly interfaces with, is controlled by station-based operations management who contribute and are party to the Asset Management Plan, the Annual Works Plan and the Renewals Programme.

Implementation of asset maintenance and renewals is mostly in-house. It is outsourced where it delivers sustainable benefits, aligns with other corporate strategies (e.g. HR) and enables MTR to retain control of its business and maintain essential technical and operational expertise. Tseung Kwan O Line infrastructure maintenance is out-sourced as a bundled contract. Maintenance of some system-wide equipment is contracted out, e.g. lifts, escalators and platform screen doors.

MTR has successfully adopted partnering relationships with its contractors to encourage them to see that MTR wants suppliers to succeed in their contracts so that there can be long term prospects together. MTR implements partnering through a joint working philosophy and practical integration of activities, e.g. co-location of combined contractor/MTR team in one open office; MTR stores and workshops as a supplier to contractors; contractors working to the same rules, procedures, S&Q standards as MTR; etc.
MTR develops proactive communication with suppliers to ensure ‘no surprises’ and to enable supportive approach when issues arise. MTR ensures that only risks that the contractor has substantial control of are priced into the contract, with MTR shouldering risks that would ultimately fall on MTR anyway.

MTR and contractors jointly manage, as an integrated team, the key works interfaces critical to passenger service operations to ensure that service disruption is avoided and the contractor’s risks are minimised. MTR’s commitment to customer service requires that there are no extended possessions or blockades. In the last 30 years there was just one planned 54-hour possession where train service between three stations on one line was not available.

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