The private company Four Brothers entered into a deal with Pakistan Railways in 2011 and made a Rs255 million investment to launch the project. PHOTO: FILE
Before steaming on to the second-year of the public-private partnership, disputes between the Pakistan Railways and the management of the Business Express have touched its peak, resulting in suspension of the services for the first time since its inception.
It has been a year since the first joint-venture of Pakistan Railways and Four Brothers – Pak Business Express – rolled onto the tracks with its first executive class trains services between Karachi and Lahore. The private company Four Brothers entered into a deal with Pakistan Railways in 2011 and made an investment of Rs255 million into the project. The privately-run train is bound to pay Rs3.1 million daily for using national carrier’s rail network and infrastructure to operate its train.
The Railways announced the suspension of the Business Express for three days in an official statement due to the spiralling outstanding dues of the private venture. Conversely, the management of Business Express clearly said that they were in no mood to resume operations till the issue of revision of the daily fixed payment is resolved, which was calculated at an 88% occupancy ratio initially.
Furthermore, Pak Business Express had also decided not to pay the fixed amount for the suspended days. “Why should we pay the fee when we are not using the railway tracks, engines, diesel and coaches?” said Ijaz Ahmad, Chief Operating Officer of the Pak Business Express, while speaking to The Express Tribune.
Since the first week of operations, Business Express had failed at times to deposit the fixed agreed amount daily, resulting in the accumulation of the outstanding which Pakistan Railways claims has now gone up to Rs310 million.
Business Express is trying hard to renegotiate the agreed amount asking to Railways’ to decrease the pegged occupancy ratio of 88% to 65%, sending requests, meeting high-ups, but a common ground is yet to be achieved.
Pak Business Express claims their average occupancy level hovers around 55%, which will put them at loss even on the 65% occupancy ratio they were negotiating, making it impossible to pay the dues.
Monday will be an important day as a meeting is scheduled between the national carrier and the private-train’s management to resolve the issue. “If they agree then it will be fine, else we are not in a position to run the train at a loss,” Ahmad said.
Railways has always given favours to the Business Express and will not let the first joint-venture derail, for this the PR had offered them to pay the dues in instalments along with the fixed charges, but they failed, said Zubair Shafi Ghauri, director public relations of Pakistan Railways. However, the issue has continued to become more and more irreconcilable.
PR believes that although the venture is profitable for the carrier, the financial model of the privately-run venture was poor. The occupancy rate fluctuates accordingly and during winters, passenger traffic is lowest.
Recently, Railways was forced to cancel services due to negligible reservations rather than the usual – fuel shortage. Business Express was also facing the same dilemma, especially in the presence of a couple of other trains with a similar model.
It does not seem possible for Business Express to operate under such tough circumstances; however, the management is hopeful that once they get a concession in daily charges and outstanding dues, they will be profitable even after cutting fares for all classes, Ahmad added.
Published in The Express Tribune, January 27th, 2013.
Like Business on Facebook to stay informed and join in the conversation.
COMMENTS (5)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
1732486769-0/image-(8)1732486769-0-270x192.webp "lahore s smog lessons to be learnt")
The assertion of "Four Brothers" borders on the ridiculous.An occupancy level of 55% after one year of operation is promising given the fact that the service is "expensively" priced at Rs.11,000 for a Lahore to Karachi round-trip business class fare.Compared to that,I know that PIA has some deals on this sector as low as Rs.10,600 for domestic legs of international flights accommodating this sector.Otherwise one can easily find round-trip fares on PIA for around Rs.14,200 on this sector if you shop around. Compare a 90 minute flight to 18.5 hours by rail and the cost differential doesn't make sense.Also, during this first year of operations "Four Brothers" have only gone through one cycle of seasonal holidays such as Eid and summer vacations of school going children where there is an automatic increase in demand of would-be passengers.Occupancy levels in just the upcoming summer and holiday season alone can change the equation of current accumulated occupancy levels.And then again there is never a mention of the freight coaches that are being run as part of this service.Remember that companies such as Daewoo have seen an exponential increase in revenues in the freight component of their regular bus services.What needs to be recognized is that there is a lot of potential to run this service profitably,which is why "Four Brothers" is there in the first place-to realize these potential rewards.
Having said that, I feel that while this private company is innovative in terms of some services that it offers,it needs to work on better pricing and marketing strategies.They need to attract travelers who have become shy of using trains after experiencing years of neglect in the publicly run Pak Railways.This neglect has taken place over decades but if this service continues to run efficiently,it will take only a few years to reverse the level of confidence of the public who desire to experience safe,reliable,comfortable,and cost-effective transportation services for themselves and their goods.
As a business decision agreeing initially on an 88% occupancy ratio is a flawed decision.A figure that was overly optimistic to achieve for "Four Brothers" and simply too good to be true for "Pak Railways."Perhaps a tiered percentage approach over a fixed tenure of 3,5,or 10 years would have made more sense.Or perhaps "Four Brothers" just wanted to get into the system with a deal based on rosy figures and somehow craftily renegotiate the initial terms of the contract after just barely one year of operations.Or the management of Pak Railways just wanted whatever investment Four Brothers offered and revenue in the form of hard cash on a daily basis.We are just left to guess and in all this talk no one mentions sharing on revenue from freight!!! As in most things in Pakistan,seemingly good things just don't seem to get done in the right manner.The problem starts with ill-intentions before getting into a contractual agreement,and then just ends with the shoddy performance of management.How often have we actually seen this happen? I sincerely hope that "Four Brothers" can manage to re-do the script of this fledgling saga.
Unrealistic, expensive and impractical. Like PIA, the Pakistan Railways is a moribund state corporation and is in urgent need of privatization. Therefore, it enters into agreements for some hope of a turn around, which is not forthcoming in the near future. Privatization and a near complete change at the top going down to the middle level is required, sans political appointees. Salams
Do you really have to use the term "Mexican Stand off"? Most of the readers would be confounded when they don't find any reference to Mexico in this deal :). You want us to google and find out? Fair enough
I wonder how private trains are running in profit and give bed and snacks. Railway should find out secret of running trains in profit