Edinburgh Trams to run at operating profit?

The City of Edinburgh Council have claimed that Edinburgh Trams will run at an operating profit – despite media reports suggesting otherwise. The Council says that in the 15 year business model, which will integrate the finances of Lothian Buses and the trams, there will be a surplus of £5 million and that the tram on its own will run with a £48 million operating surplus.

According to a Council report maintenance and refurbishment costs for the tram system, which total £87 million and are not part of the operating costs, will be covered by surplus income from the tram (£48 million), through the dividend paid to the Council by Lothian Buses (£30 million), a dividend from tram operation (£3 million) and through other funding which comes to £11 million. This other funding is expected to include tax savings and additional income including advertising. And all that apparently means that Edinburgh Trams will be able to come in at an operating surplus after the first 15 years. Clear? No, thought not.

Perhaps Transport Convener, Cllr Lesley Hinds, can clear it up: “These figures are provisional but they stack up and, all things considered, Edinburgh’s new transport company is predicted to deliver a surplus.  Even on its own, the tram is predicted to deliver an operating surplus.  The tram and bus service will be fully integrated, with tickets, timetabling and everything else being delivered through one system – this is the same for the finances. Under one company both services need to operate together. We’ve already committed that tram will have no negative financial impact on the bus service and, although the arrangements are still in draft form, we’ll ensure that any dividend drawn from income will go back into Edinburgh’s transport system. Whilst this business model and all predictions have been and continue to be verified externally, it’s important to remember that they are still predictions.  The Council will bear the financial risk so I’m determined that numbers are closely and continuously scrutinised as we move towards service.”

Basically it seems that as far as the Council are concerned the maintenance and refurbishment costs of the tram system are not included in the operating costs which means Edinburgh Trams can come in at a profit. This profit is then going to be used to partly pay for maintenance costs alongside any other funding sources they can find.

The report was due to be considered by a Full Council meeting this week and a further report is then due to be produced in August once further financial due diligence is carried out.

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1 Response to Edinburgh Trams to run at operating profit?

  1. John Gilbert says:

    Doubtful whether the Edinburgh trams will run at a profit until more lines are built. At the present a large part of the present line runs through relatively sparsely populated areas, and there is also the problem of that parallel bus line from the airport which will abstract traffic from the trams.

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