Despite the pandemic and the large drop in the passenger numbers, municipal public transport company Rigas Satiksme (RS) closed last year with about EUR 3.5 million in profit. At the same time, the company warns that this has been achieved by cutting costs, but this year it will not be possible to cut internal expenses at the same amount. The biggest challenge will be to understand whether and how passenger flows will change, and whether it will be at all possible to renew passenger flows at the same amount as they were before March 2020, when the pandemic starred, said RS board chairwoman Dzineta Innusa in an interview with LETA.

Can you tell what the company’s results for last year are and what the impact of the pandemic was?

Unaudited annual results have been drawn and a sworn auditor is auditing the 2020 financial report. The auditor’s report should be ready by the end of April. Right now we can say that, despite the pandemic and the large drop in the passenger numbers, the company closed last year with about EUR 3.5 million in profit. It means that we have managed to balance revenue and expenditure, revising significant items in expenditure because revenue from passenger tickets, which has been our main revenue source, last year dropped by EUR 18 million. In previous years revenue from passenger tickets reached about EUR 50 million, while last year it was below EUR 33 million.

The revenue drop has been compensated by significant cuts in expenditure - reduction of workload, purchase of materials, equipment and other resources We have revised procurement procedures. This all has helped to close 2020 with very good financial results.

Are there no concerns that reduction of costs will backfire in the coming years when the costs will grow?

Costs will definitely grow because we have to start work on significant investments in the company’s infrastructure, fixed assets, new transport vehicles. But these investments were not possible last year because they have to be made in an open procurement process, in line with the planned projects. If projects are not approved, investments cannot be made.

Therefore, reduction of costs has been on the account of change in investment plans, principles, transferring to more transparent procedures.

It was said earlier that in order to finance RS investments and earlier loans, the company plans to borrow more than EUR 37 million this year. Have there been negotiations with banks?

These are not new loans, but refinancing of the loans with a better interest rate, longer maturity term so that there is lower annual payment. The above-mentioned loan is related with completing procurement of low-deck trams - 20 new low-deck trams that we will receive from Skoda Transportation.

What are the largest investments planned for coming years?

During the next five to seven years, we will have to replace at least 255-260 diesel buses. They are outdated and most likely will have to be replaced with electric transport vehicles which are more expensive. However, the green components are mandatory in public transport, starting from 2024. Also, we have to continue to upgrade our tram park because trams used in passenger transportation are up to 40 years old, their maintenance is becoming more expensive. All this means that we should buy new transport vehicles.

What are this year’s plans if we optimistically assume that by the second half of this year a sufficiently large number of residents have received vaccines?

We hope very much that vaccinations will be faster. As restrictions are eased, we can win back some of the passengers and return to normal work routine. At present costs are much higher than revenue from tickets. We hope that the situation will improve by the middle of the year at latest. At present we work in order to meet all requirements of the pandemic restrictions.

Does the fact that you closed last year with a profit mean that you will not go to the Riga City Council with a request for subsidies?

These issues should be separated. We will turn to the Riga City Council with a request for subsidies because it is related with ensuring the services, and not our inability to ensure our operations. If a service is ordered, defined in kilometres, runs, discounts for certain passenger categories, then it is logical that the client is paying for this service. Subsidies for 2020 are related with our balanced expenditure and revenue positions. Second, the Riga City Council compensated for loss caused by a drop in the number of passengers during the state of emergency. It does not mean, however, that this matter has been solved this year. In January, RS loss might reach up to EUR 1 million. This is because we increased the number of runs and because our resources cost more during the cold season.

The subsidy earmarked for this year has been based on a forecast, but only around the third quarter of this year we will be able to tell what the actual situation is.

Does it mean that negotiations on the new subsidies most likely will be held in the third quarter?

It will most definitely be when we understand this year’s cash flow, losses, what the impact of Covid-19 on the passenger flows is - whether passengers are returning or are as few as right now.

Do you think ticket prices or the current discount "basket" should be revised?

In fact, it is a political decision. We have discussed it. On the one hand, it could be a direction which would help us to increase revenue. On the other hand, any changes in price policy also change the choice made by passengers. The price growth might also mean a drop in the passenger numbers, increase of private transport in Riga. These choices are not easy.

Subsidies of public transport is one of the ways to motivate people to choose public transport over private transport, allowing to set lower ticket prices, and such approach is applied in several European cities. However, RS ticket prices have not been revised for more than six years, while expenses have been growing.

RS had been involved in different scandals during the previous composition of the Riga City Council, starting with "nanowater" and ending with consultants. Has the company managed to get rid of this "heritage"?

As it usually is with "heritage", also this one has left a long-term impact, and we still feel it.

All consultant agreement were terminated already in 2019, we don’t have them anymore. Court proceedings are still ongoing on cases involving different violations of competition rules. They take time, and verdicts, possibly, will be ready this year. It is not possible to get rid of such "heritage" fast.

What is the progress in the case, enforcing losses from former company’s board members?

The case was started last year and the first court hearing will be held in April. It is hard to predict the progress in the case, but, as there are four defendants, the process is becoming complicated.

RS has taken over maintenance of e-tickets system. Is it clear what will happen in the future? Will there be a new system formed or will you continue to work with the current system?

The current system will work until a solution is found for a new system. We are not discussing whether there will be a new system. We are working on the definition for functionality of the new system. The current e-ticket system is a closed system, based on a smart ticket and different kinds of e-tickets. The new system will be based on open data principle. Namely, the system should be simple and there should be a possibility to add new models without being dependant on one developer. Also, it should be based on the principles of a payment card that would reduce maintenance of the system and increase functionality.

The current system is working well and will continue to work until a new system is ready. It will happen in the way of an open tender. Before the pandemic, we carried about 140 million passengers a year, different categories of passengers with different discounts and statuses - pupils, pensioners, students, medical employees. All this information will be integrated into the new system. We should be able to introduce the new system in the Riga public transport in two to three years.

Is it clear when the tender will be announced?

At present, the Riga City Council transport department has set up a workgroup of different experts in public transport who will define the requirements for the new system. When it is done, a procurement procedure can be announced.

What could be the future of Rigas Acs company?

Rigas Acs was established with a goal to develop new IT solutions and introduce them in the public sector. This included monitors in the public transport stops. At present, a situation when RS subsidiary is performing one function, while RS is already working on different development plans, is not the most successful solution, but a decision on a merger is not a matter of days as there are different liabilities and different progress in projects.

How cooperation with providers of minibus passenger services will be organized in the future? Will RS continue to purchase this service, will cooperation with Rigas Mikroautobusu Satiksme continue?

We have no choice because there is a valid contract until 2026. Still, the amount of services has changed. In 2018, 2019, RS paid even up to EUR 15 million to the company, then last year these costs reached EUR 5 million, and this year, possibly due to the pandemic, this amount could be below EUR 4 million. However, for as long as the contract is valid, it is binding.

Will you think about it after 2026?

First, this will happen when the contract expires. Second, we should see how passengers’ habits change. It is currently the biggest challenge to understand whether and how passenger flows will change and whether it will be at all possible to resume passenger flows as they were before March 2020 when the pandemic started. We see that remote work is becoming a new standard.

The new Riga City Council promises changes in organization of traffic in Riga. What do you think about the experiment on Caka Street?

At the very beginning, when the experiment started, and just one lane was left in each direction on the street, the public transport was delayed - by 20-30 minutes from its timetable. Now it is not so, but it should be stated that the overall traffic has reduced. In order to improve the situation, the traffic lights were adjusted to ensure smoother traffic. It significantly improved the traffic. However, the real situation can be assessed only when we return back to normal life.

More changes can be expected when construction of Rail Baltica starts. Have you had negotiations with builders, the Riga City Council on how to organize public transport during this period?

We have been speaking with the builder - BeReRIX - from the very beginning. The builder has asked us how to reorganize power network, where public transport will go and how we will change some routes. These matters are being coordinated all the time. Of course, there will be changes during reconstruction of the tunnels on Gogola Street and Dzirnavu Street. Public transport will use other streets then, but it will not stop.

Large changes, also in relation with the EU Recovery and Resilience Facility, will take place in organization of public transport in the Riga region, including Pieriga municipalities. How do you see your role there? Would RS become a public transport company not only for the Riga city, but the whole Riga region?

This would be a great opportunity for RS to become a public transport company not only in the Riga city, but the Pieriga region. We all are aware that most of Pieriga residents come to work to Riga and commute back home in the evening. Therefore, this would be a direction for development for RS. It would also be of benefit to the passengers as they would not need to change buses to get home. It would also reduce use of private transport.

Still, this will require coordinated work of many parties - the state, Riga city and Pieriga local governments.

At present this is being discussed only by Road Transport Directorate and local politicians. Do public transport service providers also participate in the discussions?

We should remember that legislative changes will also be needed on public transport services. We are participating in the talks and providing out proposals. We have been working on experimental routes with the Road Transport Directorate since last year. Three routes have already been developed - to Jaunmarupe, Sauriesi and Balozi. Now political and financial decisions should be made by the state and local governments.

Can you tell in more detail about these three experimental routes and how long it will take for buses to run in these routes?

The buses might run the new routes already in summer. Such extension of routes is good for the state because then there is no need for regional transport in the said routes and the compensations are not necessary. At the same time, this means bigger workload for Rigas Satiksme. There should be a balance. If the number of passengers is sufficient, these plans will not cause any loss to RS and respectively to the Riga city on the account of subsidies. However, the pandemic does not allow us to move forward with the plans because it is impossible to predict how many passengers there will be on those routes. We hope that the state of emergency will end in April or May, and in the middle of summer we will be able to make practical steps in development of these three routes.

Another new thing that has been discussed in the Riga area projects is a metrobus. Will it also be a RS project?

It has not been explained what a metrobus is. It will not be different means of transport. It will be a metrobus line drawn in the city’s infrastructure. A metrobus line means a separate public transport lane, separated from other traffic. It still has to be decided whether this lane will be used by trolleybuses, electric buses or all kinds of public transport together. There is a potential to turn this into a tram line. It is a lane that will be built by the Riga city, and we will ensure our transport, most likely, green transport - electric buses with a different speed and intensity.

You mentioned electric buses. What is the progress in plans on their purchase in Riga?

We have sent letters to different bus producers with a request to test their buses. At the same time, we are working on technical specifications because we will need them in Riga. Purchase of electric buses is not the biggest challenge. The biggest challenge is to plan infrastructure. Charging infrastructure will be needed in our parks, in the city.

Is money earmarked for the purpose?

We are working on the financing. First, we are looking at possibilities to apply for co-funding from the EU funds. Of course, RS cannot find all the necessary money in its own funds. Increase of our share capital should be solved together with our owner - the Riga City Council - in order for us to be able to borrow additional money for all investments.

RS does not have a goal to obtain a new transport vehicle at any cost. It is a way to ensure transportation service. If the Riga city development plan says that we should transfer to lower emissions, greener transport, if it is stated in the EU regulations, we have to find common solutions also for financing.

Some time ago the bus route No. 40 was turned into trolleybus route No. 4 in order to ensure that electric power could be used at least partly on the route. Are any similar changes planned?

Yes. First, we have at least 10 hydrogen trolleybuses that perform a part of their run on hydrogen, without using electric power. Therefore, such transformations will continue also in the future. This is the first step to gradually transfer to different solutions.

A hydrogen bus was tested. What are the conclusions, could RS purchase such buses?

Not only we could, but we should buy them because our hydrogen station currently is producing more hydrogen that we consume. In order to complete this project, we need at least 10 hydrogen buses. We have calculated that the capacity of our station is sufficient for at least 15 hydrogen buses, therefore, we have already prepared a tender. As soon as it is possible to apply for such a procurement within an EU funds project, we will submit it. Apart from the current 10 hydrogen trolleybuses we would need 10-15 buses. The test drives had been held to make sure on which routes the buses can be used, what distances can be made, in what climate regimes they can be used.

What are the conclusions? Is Riga appropriate for such buses?

Absolutely. The question is about routes as they can run shorter distances than regular buses without filling up. We just have to make the right choice. There are positive responses also from bus drivers.

Considering all these plans, is it clear when RS could part from diesel vehicles?

It will not happen that soon. We have about 500 buses, and in the coming 5-7 years at least 255-260 buses should be replaced. However, while a bus is in a good technical condition, we will definitely use it because huge resources have been invested in the buses. It means that they will be operational for a long time.

RS has been working on a system that will allow to see public transport arrival and departure timetable in real time. At present, electronic tables are only in some public transport stops, but the tool will help passengers to see in their smart phones when the bus, tram or trolleybus will arrive, is it late, at what time will it come. We will start testing this tool with trams in late April.

We are also working on QR code tickets. It is not related with the current ticket system, it will work autonomously on a mobile app. This will allow to differentiate purchase of tickets, especially convenient for passengers who are not using public transport regularly and need to pay for one or two rides. In late March, early April we will make a narrow testing group who will test how the tickets can be bought and registered in public transport. As soon as the test is completed, it will be available to all smart phone users.