Arriva’s losses at €35 million

Malta's public transport operators Arriva have been struggling with losses totaling over €35 million since the start of their operations in 2011, raising new questions over the sustainability of the private firm's future.

MaltaToday was given an insight into the financials of Arriva Malta, which has not yet published its annual figures with the registrar of companies, by a source privy to the company's operations.

MaltaToday's information - which was not denied by Arriva Malta when faced with the figures - is that the company lost just under €16 million in 2011, and €20 million in 2012.

The figures testify to the problems Arriva Malta encountered in fulfilling its 10-year obligation to deliver a timely service for an extensive route network that was devised by the previous administration, and which had to be tweaked several times due to numerous commuter complaints.

According to Arriva's parent company Deutsche Bahn's annual report for 2012, €71 million in losses were posted by Arriva as a business unit in "expenses from the adjustment of provisions for pending losses in regional transport in Great Britain and in Malta".

Adding to Arriva Malta's woes, apart from having seen four chief executives deployed to the island to oversee the operation, the company lost the support of its local shareholder Tumas Group, which held a 33.3% share.

MaltaToday asked CEO Mark Bowd to specifically comment on whether Arriva Malta was still a sustainable operation, and to what he attributed the losses.

Additionally, this newspaper asked Bowd when the company was forecasting a turnaround in its 10-year commitment, and to comment on the loss of Tumas Group on its operations.

In his reply, Bowd admitted to the "difficult start" Arriva had had in Malta, but did not enter into the picture that the company's losses was painting for its future.

"The step-change from a fragmented to a fully liberalised bus market was a major organisational and cultural change for Malta's transport system. Undoubtedly, there was a difficult start. However, we have implemented a number of initiatives to strengthen our business and improve our services for our customers including investments in vehicles, customer information systems and our people as a major employer on the island," Bowd said.

"[Transport] Minister Joe Mizzi is fully aware of our position and we are working together to resolve the current issues and to ensure the contract and services operate on a sustainable basis," the CEO added.

 Arriva will be paid a government subsidy of €10.6 million throughout 2013, according to budgetary estimates, a little more than the €9 million that previous bus owners were paid in their last full year of operations in 2010.

When the 10-year contract with Arriva was signed in November 2010, the bus company was to receive an average of €6.2 million per year in subsidies. Arriva started route operations in June 2011.

The Transport Ministry had said the subsidy was fixed for the contract's duration and was much less than the money paid to the previous bus owners. But within a year of its operations, Arriva Malta's subsidy has been increased to an average of €8 million per year.

This revision was noted by the National Audit Office in a report on the management of public finances. The addendum the original Arriva agreement was signed in April 2011, that increased the compensation owed by the government to €79.8 million over the 10-year tenure.

The 29% increase was the result of substantial route changes requested by Transport Malta following complaints about the service.

Arriva's bus service entered into a new crisis last week when 68 bendy-buses were removed from the streets following three incidents in which the bendy buses caught on fire.

Arriva agreed to cover the costs of an interim measure ordered by Transport Malta to have the Unscheduled Bus Services cooperative cover the routes previously serviced by the bendy buses. An independent investigation was also launched to inspect the vehicles.

Since setting up shop, Arriva has been plagued by criticism over the route network devised for it by Transport Malta, due to a lack of buses to effectively service the network. Teething problems, wildcat strikes on its first day of operation, and the lack of buses, turned the bus service into one of Lawrence Gonzi's major headaches. It nearly cost transport minister Austin Gatt his job following a no-confidence motion filed by the Opposition in 2011. Gatt was saved by the Speaker's casting vote when Nationalist MP Franco Debono abstained on the motion.

But the vote forced Gonzi to take public transport under his wing by appointing a task force that included the police and the armed forces to oversee traffic problems resulting from the deployment of the buses.

When London mayor Boris Johnson amused Conservative delegates at their 2012 party conference in Birmingham by saying Arriva's bendy-buses were "now clogging the streets of Malta", the Labour Party issued billboards deriding Austin Gatt for his choice of bendy buses.