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On the financial viability requirement for public transport operators

February 2020
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I came upon the news that the P2P Bus service between SM City North EDSA and SM Megamall suspended operations The Land Transportation Franchising and Regulatory Board (LTFRB) released a statement to clarify the circumstances surrounding the suspension, which apparently was the initiative of the operator rather than the agency. Apparently, too, some people were quick to attribute (blame seems to be the more appropriate adjective to describe how some netizens reacted) the suspension to LTFRB. Here is the statement posted on their social media page:

Land Transportation Franchising and Regulatory Board – LTFRB
February 23 at 7:52 PM ·

LTFRB PRESS STATEMENT ON P2P OPERATIONS OF FROEHLICH TOURS, INC.
23 February 2020

The Land Transportation Franchising and Regulatory Board (LTFRB) would like to clarify that it did not order the cessation of the P2P operations of Froehlich Tours, Inc. (FTI) which plied the SM North EDSA-SM Megamall and Trinoma-Park Square routes.

FTI was one of the first to be awarded with P2P routes in 2016. In November 2019, MAN Automotive Concessionaires Corporation (MAN) submitted a letter requesting the Board to look into the financial capability of FTI to maintain its operations, fund expenses that may arise from accidents, and continue to provide public service.

According to MAN, an exclusive truck and bus importer, assembler, and distributor, FTI initially acquired 17 bus units amounting to a total of P185.7 million from them. FTI was only able to pay P39.2 million which resulted in MAN having to repossess 12 bus units. To this day, P19.75 million is still left unpaid by FTI.

While these allegations are still under investigation by the Board, an inspection of the FTI bus units revealed that the company’s Provisional Authority, which allowed them to run and function as a public service provider, has already expired and no renewal was filed.

As of now, an order has been sent out to Froehlich Tours Inc. to submit its 2019 Financial Statement within a period of five (5) days from receipt of a copy. The hearing is reset, upon the agreement of both parties, on 3 March 2020 at the LTFRB Central Office.

Pending the outcome of the hearing, the Board shall adopt measure in the coming weeks to ensure that the riding public will be provided with the needed transport service on the routes affected.

There are two major points in the statement. One is on the financial viability of the operator and another is on the provisional authority granted by the LTFRB, which is a regulatory agency. The latter pertains to something more temporary and authoritative than a franchise, which is basically a license to provide transport services. These provisional authorities are often granted by the agency for so-called “missionary routes” as well as for supplementing the supply of vehicles during peak seasons like Christmas, Holy Week and Undas.

Financial viability is a requirement for all public transport operators. It is part of the formula for determining the viable number of units (i.e., vehicles) considering the fare that is to be charged to passengers taking into consideration the operating costs of operators. If this requirement was implemented strictly, a lot of operators would not be operating PUVs in the first place. The LTFRB, however, as well as its mother agency, the DOTr, have been lax about this requirement for so long a time that it is difficult to recall the last case where this was cited as a reason for suspending operations.


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