SINGAPORE — Having been hit by several high-profile train breakdowns recently, SMRT said today (Oct 28) it expects to spend about half of its total rail revenue by the end of its financial year on maintenance-related expenses for the network, as it seeks to increase its fleet and strengthen the service of its ageing rail network.

“For every dollar of fare revenue collected, we spent about 41 per cent on rail-related maintenance activities (for the second quarter), and that is expected to grow to about 50 per cent by the end of this financial year,” said SMRT president and group CEO Desmond Kuek at its second quarter results briefing today.

His comments come several days after The Straits Times published a report comparing the maintenance-related fees by Hong Kong’s MTR Corporation and SMRT, saying that MTRC had spent 37 per cent of its rail revenue last year on maintenance, renewals and service improvements versus 19 per cent by SMRT.

“That is not quite the right calculation, because there are a whole lot of other maintenance-related activities that are captured in accounting under other parts of the balance sheet, and it is much more accurate for us to explain more clearly,” Mr Kuek said.

According to SMRT, the indicators of rail maintenance-related expenses refer to rail maintenance staff costs, depreciation of rail maintenance assets and other rail maintenance-related operating expenses.

SMRT’s rail-related maintenance costs ranged between 39 per cent and 45 per cent of rail revenue during financial year 2015, it said today.

SMRT had previously not stated these calculations, but in efforts to maintain clarity, it disclosed the figures in today’s media briefing. For the fourth quarter ended March next year, such costs are likely to increase to 50 per cent, it said.

SMRT said the reasons for the increase is due to growth expansion, upgrading activities and the recent revision of fares that would take effect by the end of this year.

“We are preparing for the Tuas extension and we have to ramp up our staff headcount, in order to achieve it in good time,” said Mr Kuek.

The company is also taking in 45 new trains from now till the end of next year, and will require more crew to support the larger fleet.

The increased costs will also include the renewing and upgrading of its network to replace the rail sleepers and upgrade the signalling systems.

SMRT’s rail business accounts for about 50 per cent of the group’s total revenue. However, the ailing segment has been a constant drag on the group’s bottom line, with both the train and LRT divisions incurring operating losses over the past three quarters.

Going forward, the company expects to face continued headwinds.

“Operating expenses will continue to increase due to intensive maintenance and renewal programmes of the ageing network,” said SMRT CFO Manfred Seah.

A 1.9 per cent reduction in fares announced by the Public Transport Council (PTC) last week will see the transport operator cut about S$20.4 million in fare revenue a year. “We also see fare revenue dropping due to the reduction in fares,” Mr Kuek said.