How did Sadiq Khan get caught by the cable car’s finances?

Happy new year. Sorry, back to the cable car again.

Greenwich cable car, 18 June 2012

If you use public transport in London, 2016 opened with a fare rise – and that included the Emirates Air Line, which slapped 10p on an adult single trip. The annual round of fare rises also kicked off campaigning for May’s mayoral election, with the Greens’ Sian Berry demanding London’s fare zones be axed (Woolwich residents fuming at being stuck in zone 4 take note) and Labour’s Sadiq Khan pushing his plan to freeze fares.

Khan told the Evening Standard he would fund the £450m freeze by scrapping Boris Johnson’s “vanity projects”, with our very own cable car in the firing line.

“I’ll start by ending any further public funding for the Emirates cable car as soon as the contract allows — if that means it closes, then so be it,” he said. “It has been a disastrous waste of money and costs more than £5 million a year to run.”

This is cobblers. The cable car’s operating costs are certainly about £5m – but its popularity as a tourist attraction means it’s making a sum quite near that back in fares. This is a bit like Khan demanding the 177 bus is scrapped because it costs £4.6m each year to run – he’s ignoring what it makes back in revenue.

Indeed, I’m indebted to Mayorwatch’s Martin Hoscik for chasing up the figures with TfL – the accounts show it makes a surplus.

An analysis of Transport for London’s audited accounts show that, instead of receiving a “subsidy”, the scheme’s fare revenue met or exceeded operating costs in each of the last three financial years.

In its first nine months of operation, the period covered by TfL’s 2012/13 accounts, just under two million passengers were carried, generating fares revenue of £6m.

During 2013/14 passengers numbers, which were boosted the previous year by the scheme’s novelty and London’s hosting of the Olympics, fell to 1.5 million passengers with fare revenue of £5m.

Passenger numbers remained flat in 2014/15 at 1.5 million but revenue increased from £5 million to £6 million.

We know that operating costs have fallen – which is why a story last summer that the cable car was losing money fell apart. Transport Commissioner Mike Brown’s most recent report to the TfL board said the Emirates Air Line has made a £1m surplus since it opened.

Boris Johnson launching the cable car in 2011

Boris Johnson launching the cable car in 2011

This doesn’t suddenly make the cable car a brilliant idea – user numbers have pretty much flatlined, and Boris Johnson’s stated aim of it paying its build costs (£16m (£60m minus £36m from Emirates and £8m from the EU)) looks like a tricky proposition.

It’s also certainly so far failed as both a commuter link and a generator of significant extra employment, both justifications used for building it.

But Khan was wrong to have highlighted the operating costs.

The big flaw in the cable car is that £16m that could have gone into, say, improving the botched bus infrastructure on the Greenwich Peninsula (where a pedestrian died yesterday morning) has instead gone into a tourist attraction that sits apart from the public transport system with incompatible fares.

Indeed, as Mayorwatch points out, the Emirates sponsorship contract ties TfL into operating it until 2021, by which time London could be on its fourth mayor. There is a break clause in 2017, but it’d be costly for TfL to break the contract and it would lose a big chunk of the Emirates sponsorship cash.

So the mayoral candidates are stuck with a tourist attraction that seems to just about tick over financially. It’s one to watch – maybe tinkering with fares could boost weekday usage – but with TfL losing all its government grant by 2019, there are bigger things to worry about, like protecting bus services.

Asked to comment on the scheme’s published finances, a spokesman for Mr Khan’s campaign said: “We’ll review it… and the likeliest option is it closing in 2021”.

But Sadiq Khan doesn’t know what the Royal Docks and Greenwich Peninsula will be like in 2021, when the Emirates contract ends. Nor do any of us. I’m not sure whether there’ll be a significant commuter traffic (you’d need a lot of people living on the peninsula and working in the Royals, or vice versa) but there’s clear evidence of plenty of leisure traffic. Closing it would leave London one river crossing down – however flawed it may be, and may leave TfL recording an overall loss.

The mayor in 2021 could sell the cable car, which could guarantee an instant return); could cut opening hours (the current contract mandates opening up by 7am, when hardly anybody uses it); or could go the other way and integrate it into the public transport system (which could cost a bit but most public transport costs a bit).

Or the 2021 mayor could carry on as now, with a new sponsor contract, maybe wiping the build costs once and for all, and leave the issue for few years in the future.

The cable car is an intriguing problem for the next mayor – and how they react to it will tell you a lot about them. What we’ve learned about Sadiq Khan is that he needs some new advisors – fast.

6 comments

  1. Shivanee

    Just to say that local residents are very deeply saddened by the tragedy yesterday. We understand the victim was a local resident. Our thoughts are with their family and friends. As the second such incident in less than two months, local residents will continue to raise the issue of botched bus routes on the Peninsula with the council and authorities, as we have done in the past.

    More buses going through the Peninsula and East Greenwich, fast becoming very high density residential areas, is not the answer. In that respect, the cable car is fine. Particularly as TfL now has to operate under commercial revenue-generating terms (‘Trading Fund’ in government-speak?).

  2. Mark Smith

    The traffic is terrible around the Blackwell lane A102 approach area and getting worse on the Peninsula
    There is
    Robert Owen Nursery
    Saint Josephs Catholic School
    Christ Church School
    And now on the peninsula St Mary Magdalene school
    all in that area, and anyone who has to brave the gauntlet walking their 5 year old from East Greenwich to St Mary Magdalene’s will be aware of the daily danger that the traffic imposes.

  3. Tom Chance

    Personally, I think Sadiq Khan’s position is very shortsighted. Yes, the cable car was built in the wrong place at the wrong time, and with an expensive and disjointed ticketing system has become a bit of a joke.

    But as the peninsula and docks are built out, it could become increasingly useful for residents as well as tourists. What’s more, if the next Mayor adopted the London Assembly’s position – proposed by the Greens – that the cable car be brought into the Oyster/cashless and Travelcard system, it would become a far more viable option for commuters.

    Writing it off as a gimmick is symptomatic of Sadiq Khan’s lack of clear thinking about transport strategy for east London. Where are his alternative proposals for pedestrians and cyclists wanting to cross the river there? Or does he expect they’ll slip into the Silvertown tunnel?

  4. lucyneville2013

    Populist, off-th-cuff-type, knee-jerk stuff from Sadiq Khan. Suppose it’s difficult to resist when media-pack demand straight-talking when really a more nuanced and considered response is needed. Sometimes I think even the public don’t want to wait for this kind of response either.

  5. Gondola Project

    Thanks for the insightful post. I’m happy to see the many online articles that have been written to correct the mayoral candidate’s inaccurate comment regarding the cable car. While the EAL has had a tumultuous history, I do feel that the system should be judged on both its successes and failures — and having someone make false comments to (in)directly defame your opponent is troublesome.. but I suppose that’s the nature of politics.

  6. Walt

    Shouldn’t the figures be good reason to revise the pricing scheme of the cable car??

    If it is indeed true that there is high demand for the cable car by tourists, or others out for 1 day, it would suggest these people would still come if the one-off ticket price would be slightly (10-30p?) higher.

    But more interestingly: if there are indeed NO regular commuters AT ALL, there is scope to RAISE revenue by dropping the prices significantly?! If the monthly fares would be the price of say, 5 regular tickets, people might consider it as a real option. Make it at least cheaper then the corresponding DLR-tube ride? Consider the extreme case, e.g. a yearly ticket the price of a few one-off tickets, would still be more income than now, with running costs staying pretty much exactly the same!

    Seems to me something TFL should at least look into, how to optimize revenue by regular commuters..