Finances of Helsingin Bussiliikenne could collapse in a couple of years

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Politicians and civil servants alike regard the current situation of the capital's city-owned bus operator Helsingin Bussiliikenne, currently facing financial problems, as unsustainable.
      Day-to-day operations are still possible to manage, but on a long-term basis, the company will run out of money.
      ”According to the asset and liability statement, Helsingin Bussiliikenne still has some EUR 15.6 million to continue its operations with. It will be enough for some time but not endlessly”, reported Tapio Korhonen, the City of Helsinki’s Director of Finance.
     
Helsingin Bussiliikenne has written off some EUR 6 million for the current year. If the losses accumulate at the present pace, it is likely that the company will be able to continue operating for another two years at best.
      While not willing to comment on this assumption directly, Korhonen noted that the bus company has been requested to submit a report on plans to improve its financial situation.
      ”The City Board demands that the company give its report by the autumn”, said Korhonen.
      Helsingin Bussiliikenne has made losses of approximately EUR 40 million since the beginning of the current millennium.
     
Helsinki Mayor Jussi Pajunen (Nat. Coalition Party) says that Helsingin Bussiliikenne has a grace period of two years.
      ”If nothing will be done in 18 months or two years, the company will be facing a financial crisis”, notes Pajunen.
      At present, Pajunen is not ready to consider abandoning the company as yet. He thinks that the company’s financial situation could be improved, which means that it is quite realistic to strive for a better result.
      According to the Mayor, when it comes to bus fares, it is very important that the city-owned bus company remains in the market.
      ”If the city is not involved in the competition, there is a risk that the level of rates goes up”, Pajunen concluded.
     
The situation of the city’s bus operator has been aggravated by the strategy of putting routes out to competitive tender, and it has been further hit - along with other carriers - by rising diesel prices.
      According to competitors, in this spring’s round Helsingin Bussiliikenne set its bid as much as 5-30 per cent below other bidders.
      Matti Lahdenranta, the Managing Director of Helsinki City Transport (HKL), said that the company has long advised the operators to avoid loss-making bids.
      ”We have informed the market that business has to be profitable. Moreover, we have suggested that the bids should be set higher, even if it would not be advantageous to us”, Lahdenranta noted.
      ”Regardless of our warnings, the bids have gone in the opposite direction”, Lahdenranta concluded.
     
Juha Hakavuori, the new Managing Director of Helsingin Bussiliikenne, agrees, saying that the low pricing policy has been a problem in the whole sector.
      ”We will have to pay attention to our own pricing, in order that we will be able to hold to our contracts while making enough money for the company”, Hakavuori concludes.
      Jessica Karhu (Green League), the chair of the public transport committee, says that the loss-making spiral of Helsingin Bussiliikenne should have been halted already earlier.
      ”I thought as much as two years ago that the company cannot continue operating like this. After all, this should be a sound and reasonable commercial operation, while it is up to the City Council whether or not the city’s contribution to the bus company should be increased”, Karhu concluded.
     
A recent article linked below noted complaints by competitors that Helsingin Bussilikenne had been distorting competition by deliberately underbidding on tenders for routes in the Greater Helsinki area.


Previously in HS International Edition:
  Record-high diesel prices hurting bus companies and their passengers (4.6.2008)
  Public transport in Greater Helsinki Area to invest heavily in future (8.6.2006)

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