Korail announced the sale of the Korail Airport Railroad yesterday to a private KB Bank equity trust fund which is a consortium between KB and the Industrial Bank of Korea. Korail sold 65.9% of its shares in the airport railroad, also known by its brand name A’REX, for 1.82 trillion won after Korail originally acquired the line in 2009. The Korea Herald reported back in January this year that Korail was launching a bid to sell the line and that the company was 2 trillion won in debt.
What was essentially a publicly owned and operated line has once again become a private company, the official name changing from Korail Airport Railroad Co., Ltd. to Airport Railroad Co., Ltd on the website. The change of ownership also comes with a change in how the business operates financially, switching from the minimum revenue guarantee mechanism which was used previously to a standard cost support model — meaning that operational costs will be subsidised by the government if there is a loss in annual revenue. This is estimated to reduce the financial burden on the government by up to 7 trillion won by 2040. The sale has also reduced Korail’s debt ratio from 411% to 310%.
Well that’s nice, but what does this mean for those who use the line?
There is still no word on whether prices will go up with the takeover or if any other operational changes will happen. According to Yonhap, the airport railroad would need to get approval from Ministry of Land, Infrastructure and Transport before putting up fares. For those who don’t know, when the Airport Railroad was first launched as a private company, fares were initially more expensive than the subway and were not integrated with the wider public transport system for easy transfers like it is now. Watch this space and we’ll report back if we hear if any changes…
Sources: Newsis | Yonhap | Korea Herald
Airport Railroad Direct to Gangnam
Prior to this announcement there was also some other related news almost a month ago. The Korea Herald reported that Seoul Metropolitan Government confirmed that the airport railroad will be directly connected to Line 9 from 2020. This will mean that travellers will be able to get from Incheon Internation Airport to Yeouido, Gangnam and other south-eastern areas of Seoul without having to transfer. These are in fact not new plans and the direct connection was planned prior to the completion of both lines so it’s great to see them finally going ahead with it. We’ll have more on this going forward closer to the time. In the meantime, you can read the article for more details.
Sources: Korea Herald
That’s terrible news. Privatization of vital services (transportation, utilities, etc.) virtually always means increased prices and decreased quality.
But I’m going to take a bit of a wait and see stance on this one since the Seoul city government in 2012 engaged in a rare act of doing what governments are supposed to do–act in the interest of the people–when it axed the price increase proposed by privately run Subway Line 9.
I’m not overly optimistic that similar benevolent policies of government will be applied to the Airport Railroad, but it is possible. So I’m going to give the government the benefit of the doubt for the moment and wait to see what happens with this line, that I actually use quite a bit.
Thanks for reporting the story, depressing as it is.
Thanks James. I had missed the plans for this so came as a surprise to me. I really hope this doesn’t affect fares significantly (or at all) as many Incheon/Seoul residents rely on this line, not just travellers.