https://orcid.org/0000-0002-5548-8010
ABSTRACT
Improving operational performance is the key concern for the transportation sector in emerging countries. In Addis Ababa, the majority of the transit service was provided by municipally owned public bus transportation companies such as Anbessa and Sheger Transport Service Enterprises. This study examined the operators’ operational and financial performance in comparison to industry standards. The ratio analysis approach was utilized to examine secondary data from 2016/17 to 2021/2022, which was employed in the study. The overall findings indicate that, despite differences in operational safety and employee productivity, the Anbessa city bus outperforms the Sheger city bus in some parameters, such as fleet utilization, vehicle usage, and service utilization. However, Sheger city bus outperforms its competitor in terms of operational safety and bus staffing levels. Finally, a majority of the data indicates that the operators’ performance fell short of industry standards. To improve their financial and operational performance and continue offering services that fall short of those provided by other companies in the city, bus transit companies, which receive government subsidies to operate their services, must significantly improve how they use their resource. Furthermore, the municipality should offer subsidies and other incentives based on the genuine company’s performance.
1. Background
The progress of the nation as a whole is significantly influenced by the transport industry (Agarwal, Citation2009). Transport has a significant role in the movement of people and products, as well as in maintaining a country’s robust economy (Iles, Citation2005). Bus transit, rail, light rail, monorail, and water transportation are all considered forms of public transportation. Due to its low operating and beginning costs, flexible route options, and accessibility to town and city centers, a conventional bus is the most popular form of public transportation in the majority of developing nations (Iles, Citation2005; Verma & Ramanayya, Citation2019). Buses are also thought to be the most popular option for most commuters because they are the least expensive form of transportation (Armstrong-Wright & Thiriez, Citation1987).
The provision of adequate and suitable public bus transportation services is therefore one of the most crucial elements of the well-being of growing and expanding metropolitan regions (Murray et al., Citation1998). However, many cities in the developing world have significant issues due to rapid population growth and a considerable reliance on private vehicles. The city’s urban transit system is under stress due to the quick increase in personal vehicles. This is because, as indicated in (Greene & Wegener, Citation1997), the community’s quality of life has been affected by the rising use of private vehicles. It contributes to issues including air pollution, road noise, and congestion. Additionally, it has an impact on how the city’s public transit runs and how well transportation firms operate.
Therefore, encouraging public transportation is the key strategy for reducing issues with urban transportation in the majority of developing nations’ cities. Additionally, air pollution offers an alternative mode of transportation, it considerably increases the value of urban living, and it significantly helps to reduce problems with traffic congestion (Vuchic, Citation2005).
Similar to other cities, Addis Ababa is rapidly urbanizing and increasing its population. Besides, there are numerous issues with the city’s current public transit system, including traffic congestion, bus crowding, and bus shortages. However, the city administration is putting more attention on local public bus transportation and routinely expanding the number of enterprise buses to reduce traffic issues in the city.
According to the study’s author, however, city services must not only be properly planned, operated, and marketed, but also regularly measured and monitored, to make urban public transportation attractive and efficient. The author believed that a way to encourage the operational effectiveness of a city’s transportation system is through good operational and financial performance measurement of services. Therefore, the main objective of this study is to evaluate the operational and financial performance of the municipality-owned public transport service enterprise in the city.
2. Literature review
The appraisal of an organization’s output as a result of the management of its internal resources (cash, people, cars, and facilities) and the environment in which it functions can be well-described as a performance measurement (Transportation Research Board, Citation2003a). It is further defined as a method to assess how well or poorly the transportation service is performing given the current operational environment (Raoniar et al., Citation2015).
Additionally, performance measurement is gathering, analyzing, and reporting data about how well a company carries out its duties and accomplishes its goals and objectives. Ideally, the process’s metrics correspond to the outcomes that the organization has attained. Descriptive metrics, however, can also be utilized to give context and pinpoint underlying causes for performance variations (Parks et al., Citation2010; Transportation Research Board, Citation2003a).
To allocate resources among competing transportation agencies and to ensure that the quality of delivered transit services keeps improving, the measurement of transportation performance is a dynamic method (Eboli & Mazzulla, Citation2012). Another impartial method of evaluating performance is through performance reviews. They are typically divided into one of two groups:
Efficiency measurements explain the relationship between the resources needed to do the work and the work that is completed.
Effectiveness metrics are frequently used as an indicator of how successfully a transportation system achieves its goals. This is typically related to the number of passengers carried and is measured in terms of passengers per vehicle hour or mile, along with the percentage of costs covered by operating income (Carotenuto et al., Citation2017; Cook & Lawrie, Citation2004).
Moreover, the effectiveness of transit agencies should be evaluated based on accepted standards. It comprises operational performance, which may be assessed using indicators like fleet utilization rate, passenger volumes, staff-bus ratio, vehicle kilometers, accident rates, and service breakdowns. Utilizing metrics such as passenger wait times, travel times, service pricing, and walking distance to the bus stop are other ways to evaluate the quality of services. Similar metrics like the cost-per-passenger-kilometer and revenue-cost ratio could be used to evaluate financial performance (Armstrong-Wright & Thiriez, Citation1987). These are also included as the key metrics for measuring the effectiveness of the public transportation system (Yunusa, Citation2011) ().
Table 1. Bus transport performance measures.
In light of the literature and studies that have already been done (Armstrong-Wright & Thiriez, Citation1987; Barabino et al., Citation2020; Yunusa, Citation2011), this study makes an effort to analyze the operational and financial performance of the city’s state-owned public bus system using the following indicators: fleet utilization, vehicle utilization, service utilization, staff-bus ratio, staff productivity, as well as the quality of service in terms of operational safety (i.e. accidents per 100,000 km). The enterprise’s financial performance is also evaluated using financial metrics including cost per km, revenue per km, and net profit margin per km.
3. Data and material
3.1. Scope and case of the study
This study’s scope is viewed from a geographical and theoretical perspective. The study’s geographic focus is the city of Addis Ababa. Analysis of the operational and financial effectiveness of the city’s state-owned public bus system is the study’s central theme (i.e. Anbessa city bus & Sheger express bus service). The study’s time frame is from 2016/17 to 2021/22, totaling six years of assessment. The performance of each transit agency can be trended for more than five years.
3.1.1. Anbessa city bus service enterprise
In 1933E.C. the Anbessa city bus service company was established to provide public transportation for Ethiopians. As a provider of transportation services, Anbessa city bus has a pervasive influence to benefit society, improve its offerings to better fulfill the demands of its customers, and cut expenses as a whole. Financial support for its operation is also provided by the city administration.
The company presently operates buses with seating capacities of 30 people with 70 standing rooms only and 50 people with 100 standing rooms only. Three central depots, four bus terminals, 124 routes, 29 checkpoints, and 1,640 bus stops dispersed across the city are used by the enterprise to provide service. Both radial and tangential bus routes are run by Anbessa bus; the majority of them are radial routes that start in the center and travel outward. Due to an increase in travel demand, Anbessa occasionally alters the number and duration of its routes. They presently have 124 routes totaling about 1814 kilometers in length. Plate 1 displays the operational features of the buses on the road.
Plate 1. Anbessa buses on the road.
3.1.2. Sheger Mass Transport Service Enterprise (SMTSE)
The Addis Ababa Transport Authority (AATA) has determined that a firm is needed to provide quick and easy access to mass transit services as well as better and more effective transportation for city residents to aid Addis Ababa’s capital city in achieving rapid social and economic development. In 2016, Sheger Mass Transport Service Enterprise began operations after being established by Regulation No. 70/2015.
It was therefore established to address the severe lack of transportation services in Addis Ababa City Administration to provide fast and convenient formal bus transportation for residents, and to provide integrated transportation services in coordination with other public transportation providers and stakeholders. The Sheger express bus includes facilities for the elderly, physically challenged, pregnant people, and children, as well as air conditioning and a GPS. Currently, Sheger operates 52 routes daily, seven days per week. The average length of each trip is 11.59 kilometers. Plate 2 shows the operational features of the buses on the road.
Plate 2. Sheger buses on the road.
3.2. Material
Secondary data from Anbessa City Bus and Sheger City Bus annual reports from 2016/17 to 2021/22 were gathered. Besides, employed data sources for research analysis include books, journals, and reports. Lastly, based on chosen performance indicators, the study employs ratio analysis to evaluate the operational and financial performance of the operators.
4. Results
4.1. Operational performance analysis
The effectiveness and efficiency of transport service operators are significantly influenced by the availability and use of buses. In addition, for vehicles to be financially sustainable throughout their operational life, they must be used effectively. Therefore, operational performance analysis is essential since it might identify a crucial factor in productivity. The final results for each chosen performance metric are listed below.
4.1.1. Fleet utilization
Fleet utilization is the proportion of a carrier’s fleet of vehicles that are in use during a given year. As a representation of the quality of bus delivery, maintenance, and servicing, it also functions as an efficiency indicator. Considering that not all agency buses are constantly on the road. For various reasons, including maintenance and repairs, some buses are anticipated to stay in the shop. Therefore, increased fleet utilization translates to more buses on the road and a lower incidence of service failures and breakdowns.
Thus, the utilization of the Anbessa municipal bus fleet was highest in 2021/22 (93.5%) and lowest in 2018/19 (38%), as shown below. Similar to this, Sheger City Bus fleet utilization peaked in 2020/21 (93.8%) and peaked in 2016/17 (48.4%). However, from 2019/2020 through 2021/22, the state-owned transit companies’ fleet utilization has increased. Furthermore, similar to Urban Bus Toolkit 2011, fleet utilization of 80–90% is regarded as desirable. The aggregate results so demonstrate that both enterprises satisfy the requirements. This shows the necessity for both businesses to maintain fleet utilization rates to increase operational effectiveness ().
Figure 1. Fleet utilization (%).
4.1.2. Vehicle utilization
This important indicator for managing public transportation systems, sometimes known as ‘bus productivity’, shows effective utilization of working capital. This is the distance a bus has covered in a single day along the road in kilometers. Besides, it demonstrates the effective utilization of cars inside the system. As a result, when buses travel more kilometers that are beneficial, they are being used more effectively. The productivity of each city’s transit firms’ fleet is depicted in the graph below ().
Figure 2. Vehicle productivity: km/bus/day.
Thus, as shown above, the vehicle productivity for the Anbessa city bus enterprise is better as compared to the other state-owned transit operator in the city. For instance, Anbessa has the highest 158 km/bus/day and 154 km/bus/day in 2019/20 and 2021/22; respectively. But during the same year, Sheger city bus scored 117 km/bus/day and 142 km/bus /day. Overall Anbessa city bus had better productivity as compared to the Sheger city bus in the city during the given period.
4.1.3. Service utilization
This displays the percentage of the capacity that is being used by regular users. Since each city’s public transit system generates its effective kilometers, it mostly depends on the volume of passengers it transports. Thus, the graphs below display the result on the number of people carried per bus each day throughout the specified years.
Hence, the ratio of the number of passengers per day on the bus was the highest for the Anbessa city bus as compared to the Sheger city bus, as shown in . This indicates that, when compared to the other operator, the Anbessa municipal bus service is very well utilized and growing year to year and reaches the highest in 2021/22 (i.e. 1,108 passengers per bus per day). Therefore, it can be concluded that the delivered services of the Anbessa bus are very well consumed by the residents of the city.
Figure 3. Service utilization (passengers/bus/day).
4.1.4. Staff-bus ratio
The term ‘staff’ refers to all individuals working for the enterprise, including the operational, mechanical, and administrative teams. In light of this, the following graph shows the staff-bus ratio results over time for the city’s state-owned bus transportation operators ().
Figure 4. Bus-staff ratio.
The BSR for the bus transit service agency is nearly similar for both providers in the city, as is demonstrated above. However, to a certain extent, it achieves the highest scores 10.8 and 11.5 for the Sheger city bus in 2020/21 and 2021/22, respectively. On the other hand, BSR for the Anbessa bus is nearly similar for the given period and in better condition as compared to the Sheger bus. Therefore, a greater ratio denotes more job creation but also lower employee productivity and higher overhead expenditures for the business. Hence, a lower ratio is always needed because it denotes good staff productivity.
4.1.5. Manpower productivity
The ratio of input to output is another measure of employee productivity. The intake for the institution is the total number of employees, and the output is measured in effective kilometers (km/staff/day). shows the employee productivity over time for each operator in the city as measured in km/staff/day.
Figure 5. Manpower productivity: km/staff/day.
The graph above shows the staff productivity at Sheger City Bus, which peaked in 2017/18 (22.9 km/staff/day), and then fell to 12 km/staff/day in 2020/21. Employee productivity at Anbessa City Bus has also remained very constant over a long period, peaking at 18.8 in 2021/22. But compared to Municipal Bus in the city, the Anbessa bus has better productivity and growth year to year than Sheger Municipal Bus.
4.1.6. Accidents/100,000 km
The study also makes an effort to quantify the frequency of incidents per 100,000 kilometers in which bus operators operate safely. displays the accidents per 100,000 km for Anbessa city buses, with the highest score of 12.68 and 12.6 in 2018/19 and 2017/18, respectively. The result for the Sheger city bus was the lowest as compared to the Anbessa bus. It suggests that there is a greater likelihood of accidents involving Anbessa city buses and it might be due to the old age of some buses since the enterprise serves for a long year in the city as compared to the Sheger city bus.
Figure 6. Accidents/100,000kms.
4.2. Financial performance analysis
An organization’s ability to effectively use resources from its core operations and create income is measured specifically by its financial performance (Jovanovic & Greenwood, Citation1990). It can be used to compare similar businesses in the same industry and serves as a general indicator of a company’s financial health over time (Katke, Citation2017). The financial performance of the city’s public bus companies will therefore be examined in this part based on the cost, revenue, and profit of each firm from 2016/17 to 2021/22.
The total revenue per kilometer for both transit service providers in the city is first shown in . Total revenue/km reaches the highest (i.e. 49.8birr/km) for the Sheger city bus in 2021/22, and lowest at 14.5birr/km in 2019/20. Besides, the total revenue /km for the Anbessa city bus is nearly similar and better during the given period with the highest score in 2018/19 (i.e. 34.9 birr/km). Moreover, the City Administration provided funding as a subsidy to the Anbessa and Sheger city buses so they could operate profitably in the city.
Figure 7. Total revenue/km (in Birr).
Similarly, the results for the city’s state-owned transport service providers’ Cost/km are then displayed in the next figure. As seen in , Sheger city buses have the highest overall cost per kilometer when compared to Anbessa in the particular year of 2021/22 (i.e. 51.9 birr/km). Cost per km for the Anbessa city bus reaches the highest in 2020/21 (i.e. 42.4 birr/km); however, for the other years, the results were nearly similar. Thus, the disparity between income and expenses has an impact on the company’s profitability.
Figure 8. Total cost/km.
Thus, the final step is to evaluate the net profit margin using each company’s annual totals for revenue and expenses. The Net profit/loss per kilometer for each transit operator over the years is therefore shown in . The outcome, therefore, reveals that the Anbessa city bus achieved a net profit of birr 1 per kilometer in 2018/19, which was the first in the preceding six years. But in the same year, the Sheger city bus also experienced a net loss of −22.3 birr per km.
Figure 9. Net profit/loss per km (in birr).
To sum up, the net profit analysis demonstrates that bus firms in the city have generally been operating at a loss for many years. Therefore, companies and governments should think about and endeavor to improve the operational and financial performance of operating services in the city.
5. Summary and discussion
Finally, the performance of the municipality-owned public bus service operators is contrasted with a few broad, industry-recognized benchmarks from the Urban Bus Toolkit (Armstrong-Wright & Thiriez, Citation1987). As shown in , the city’s state-owned public bus operators fall under less-than-standard categories in the majority of measures. It shows that they performed poorly when providing the services. In the following table, details about others are displayed.
Table 2. Performance comparison with general standards.
To conclude, for the majority of performance indicators, the operational performance of the city’s public bus operators is assessed as low-to-standard. Fleet utilization for both public bus transport service providers was improved since 2019/20 and a huge problem is also observed for the Anbessa city bus enterprise in terms of Bus staff ratio. Similarly, vehicle productivity is also a challenge for both Anbessa and Sheger city buses in the provision of public transport services in the city. Moreover, shows summary results for the key variables with their growth rate and average annual growth rate during the given periods.
Table 3. Summaries of key results.
6. Conclusion
The ratio analysis method was used in this study to evaluate the operational and financial performance of the municipality-owned public bus operators. According to the findings, Anbessa city bus performs better than Sheger city in several areas, including fleet utilization, vehicle utilization, and service utilization although there is a discrepancy in operational safety and staff productivity. On the other hand, Sheger City Bus exceeds the competition in terms of operational safety and bus staff ratio.
Moreover, when measured against current standards, the city’s bus providers do poorly on the majority of indicators. The findings thus demonstrate that bus operators will greatly increase their use of resources to enhance their financial and operational performance, even when receiving government subsidies to operate services for citizens. It implies that there is a necessity to offer residents subpar services, in contrast to other operators in the city.
Furthermore, it’s critical to enhance the circumstances under which buses operate in the city to increase the productivity of bus operations as a whole. The utilization of mixed traffic in congested areas is first and foremost one of the main difficulties in operating bus transportation in cities. Therefore, it is crucial to provide lanes specifically for city buses. To clear streets and sidewalks for buses and other forms of transportation so they may travel easily across the city, effective parking laws and parking fines should also be taken into consideration. Finally, it is necessary to assess these and other solutions to raise the system’s vitality and productivity to satisfy the expanding transportation demands of the city.
7. Contribution of the study
None of the performance studies I looked at compared the Municipality-owned operators using particular performance indicators. This study fills a research gap by, for the first time, examining the operational and financial performance of the municipalities’ transport service providers. It also confirms that, across the majority of performance measuring parameters, the enterprises’ operational and financial performances are typically below average when compared to the industry standard. Additionally, both academics and practitioners will find this work to be of great use. Municipal managers and decision-makers may find the study’s findings helpful in understanding the degree of enterprises’ performance in terms of both operations and finances. It helps them discover ineffective operations and hone in on solutions. It is suggested that there should be a continuous performance evaluation system that can measure the primary performance aspects of the bus services based on international standards to support and effectively use the interventions made by the Municipality as well as the company itself.
Informed consent
The research involved human participants, who were informed about the purpose of the study and that their participation is voluntary.
Acknowledgments
The author would like to express his sincere gratitude to the Ethiopian Civil Service University’s Research & Publication Coordination Office for their support of this study.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Data availability statement
Some or all data, models, and/or codes that support the findings of this study are available from the corresponding author upon reasonable request
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