KORAIL chief says first train fare hike in 12 years is inevitable

Han Moon-hee, president at KORAIL. [Photo by Yonhap]

It is imperative to raise railroad fares in South Korea that have been frozen for the past 12 years, according to Han Moon-hee, president at Korea Railroad Corp. (KORAIL)..

Given KORAIL’s mounting debt of over 20 trillion won ($15.3 billion) and the increase in consumer prices, it has become necessary to consider fare hikes to cover at least its borrowing costs, he said on Tuesday.

“The fares for KTX intercity trains have remained unchanged since 2011,” Han said, during a press conference held to mark his 100th day in office. “If this continues into the next year, it will mark the 13th year of fare freeze, which has become a considerable burden for the railroad operator due to the rise in consumer prices and electricity costs.”

Han went on to explain that the electricity costs for train operations, which used to be less than 400 billion won annually, are expected to exceed 600 billion won this year.

“Labor costs have risen significantly, and maintenance and repair expenses have also increased,” he said. “I believe that a fare hike is necessary given these circumstances, but rail fare hikes have always been on the backburner due to concerns that they could stimulate inflation.”

While the subway systems in the metropolitan region have seen modest fare increases after an eight-year freeze since 2015, KTX and other national railway services have not seen a fare adjustment since 2011.

Han remains optimistic about the future, saying that he “expects the situation will improve, and KTX will start to generate operating profits, possibly turning a profit by next year.”

“We also have plans to reduce our debt through developments like the Yongsan project,” Han added.

Regarding the extent of the fare increase, Han said that of KORAIL’s 20 trillion won in debt, 15 trillion won constitutes financial debt.

“We need fare increases to cover the interest on this financial debt to prevent it from growing further,” he said.

As of the end of last year, KORAIL’s total debt stood at 20.04 trillion won, up 1.38 billion won from the previous year. Out of this, the financial debt amounted to 15.19 trillion won, leading to a borrowing cost of 321.2 billion won.

With the rising interest rates compared to the previous year, this year’s borrowing costs are expected to exceed 400 billion won.