Interesting article, Akram!
Airlines are a notoriously difficult business to be in, and this makes Ryanair’s profits that much more impressive. I do agree that their business and operating models are well-aligned, and that they execute well on an explicitly clear value proposition (pay less, expect less).
I don’t think there will be a shortage of cost-conscious travelers. What I do wonder, however, is for how long they will able to keep their costs so low. As Iulia mentioned above, I wonder if any corners are being cut with respect to safety; any incident could be very damaging to their brand if consumers start to link “low-cost” to “less safe”. Non-unionized staff could band together to form a union, Ireland could change its labor laws, or new aviation regulations could be introduced around use of third party contractors – if I were an investor, I would stay abreast of some of these risks.
Great article, Miral! It sounds like a wonderful organization.
I think you hit on the critical issue that each charity must address – the percentage of donations that are spent on programs/services as opposed to fundraising or administration. In recent years I have become disillusioned by many of the large charities precisely because of the high percentage of donations they spend on fundraising and administration. I am now much more interested in smaller organizations (or even individuals living or working overseas) that can clearly demonstrate to donors the direct and tangible benefits they implement. I would say that this transparency is one of the key strengths of the PCRF.
I also love the emphasis on the volunteer medical missions that simultaneously treat local children and train local doctors. This is a more progressive approach that builds up skills in the local community and provides longer term benefits, while also addressing immediate needs.
As a matter of fact, the Transit Lab at MIT has students working on projects with Transport for London, MTR in Hong Kong and the MBTA … so we do have a sense of what’s happening in cities with better transit than Boston. Often in transit, the ideas / innovations are not that complicated or technical – the hurdle is rather one of funding and execution
Interesting comments! In terms of the “subsidy-per-rider” by mode type, subway requires the least subsidy (because it accommodates a very high ridership for relatively short distances) and is the most cost-effective mode (at least from an operational perspective). Commuter rail commands a higher subsidy, because passengers travel far longer distances.
In terms of the state-of-good repair backlog, it is 44% subway, 43% commuter rail and 9% bus (vehicles and maintenance facilities).
To your second point, I don’t see their problems as a demand issue (i.e. if only we had more demand, the T would run better). At present, there is congestion during the peak periods (which could be improved through better operations), so I would suggest that the T focus on that first. I think the bigger issue is that they are not able to serve riders cost-effectively, and I would focus on reducing their cost-per-rider before any aggressive attempts to increase ridership.
Very perceptive comment – most North American systems use flat pricing within the system (although DC is the “gold standard” in terms of pricing that varies both by distance and by time of day to encourage people to commute outside the peaks).
Resistance to variable pricing is based on politics (people are used to paying one fare and will perceive it as “unfair” if the system changes) and also technology – you need people to both “tap in” and then “tap out” of the system, which requires introduction of new technology
Also – the MBTA has surprisingly low fare-box recovery (proportion of costs covered by fare revenue), and also has lower fares than most other North American cities. There is probably room for them to increase their fares – transit demand is generally inelastic
I would say that the greater success of European transit systems is based on a few factors:
-Less auto ownership and urban form more conducive to transit use -> this results in not only higher usage, but also greater recognition among citizens of the need for transit
-Better management than the MBTA – I do feel the MBTA has been managed poorly
-More funding from the government
Very enjoyable article, Komal. Similar to many of the other comments on this post, I am a big fan of their business, and of their business model. In terms of their business model, it’s such an advantage for them to have no assets and simply serve as a platform that connects users. Although they will face numerous legal hurdles, I think they will ultimately prevail because fundamentally they are simply serving as a “marketplace”, connecting willing buyers and sellers.
I am also a fan of their business from a user perspective – getting to stay in someone’s home can provide such an interesting glimpse into a new place and enhance the cultural experience of a trip or vacation. The fact that they charge at a discount to most hotels is an additional bonus – I think they could manage to increase the price to help cover their costs and still have a very successful business model
Great article Trevor. I didn’t realize that foreign aid to Afghanistan was considered to be so ineffective – this must be a concern to taxpayers and administrators. Do you think that Roshan’s success is a one-off, or are there lessons learned from this company that could be applied to other initiatives in Afghanistan? If they have figured out a winning combination that is applicable to other projects supported by foreign aid, there may be the potential for this knowledge to be leveraged to increase the efficacy of the financial contributions