Free-ride losses jumped 70% in five years; cost recovery rate stuck in the 50s for half a decade; net loss last year hit 826.8 billion won ($541 million), nearly matching public-service costs; Seoul Metro calls for government support

Commuters board a Seoul Metro Line 2 train at Hanyang University Station. [Herald DB]
Commuters board a Seoul Metro Line 2 train at Hanyang University Station. [Herald DB]

By Shin Sang-yoon, The Herald Business

Seoul Metro's deficit has ballooned as free-ride costs and other expenses tied to an aging population continue to climb, with the operator losing 781 won for every passenger it carries. The company said the surge in fare-free ridership driven by demographic aging makes government support essential.

According to Seoul Metro, the operator posted a net loss of 826.8 billion won ($541 million) last year, up 14.2 percent from 724.1 billion won the previous year. That figure nearly matches the 816.7 billion won the company spent on public-service obligations over the same period.

Seoul Metro allocated 448.8 billion won to free rides for senior citizens and other eligible passengers last year, and spent an additional 290.7 billion won on bus transfer discounts and 77.2 billion won on commuter pass subsidies as part of its public-service commitments. Losses from free rides alone jumped roughly 70 percent over five years, rising from 264.3 billion won in 2020.

The company expects the financial drag from free rides to keep growing as South Korea's population ages rapidly. Among the six urban rail operators nationwide, Seoul Metro recorded the largest free-ride losses.

The six operators combined posted 775.4 billion won in free-ride losses last year, with Seoul Metro accounting for more than half. Unlike the other operators, Seoul Metro receives no government or municipal subsidy to offset those costs, bearing the full burden itself.

A company official said Seoul Metro has pursued a range of revenue-diversification measures — selling real estate assets, developing new business lines, cutting labor costs and cracking down on fare evasion — but remains trapped in structural deficit with no fiscal room to maneuver.

The company added that it cannot defer reinvestment in aging safety infrastructure, much of which has been in service for more than 50 years, while operating costs including electricity bills are also rising. Seven rounds of electricity rate hikes since April 2022 have pushed the company's power bill up 60 percent, or 100.5 billion won, compared with 2021.

On Lines 1 through 8 last year, the cost of carrying a single passenger came to 1,817 won, while the average fare collected was only 1,036 won, leaving a gap of 781 won per rider.

The per-passenger cost of 1,817 won includes labor, depreciation, electricity, water and heating expenses. By line, Line 2 had the lowest unit cost at 1,374 won, while Line 6 had the highest at 2,343 won.

The average fare of 1,036 won rose by only 38 won despite a 1.6 percent increase in ridership and a 150-won fare hike, falling well short of closing the gap with operating costs, the company said. The cost recovery rate stood at 57 percent, meaning fare revenue covers only about half of what it costs to move each passenger.

Seoul Metro's cost recovery rate has remained in the 50-percent range for the past five years: 50.2 percent in 2021, 53.3 percent in 2022, 54.7 percent in 2023 and 53.9 percent in 2024.

Han Young-hee, head of Seoul Metro's planning division, said free rides are a public service mandated by national policy and that the social costs involved require the government to take responsibility. "A government support plan for free-ride losses must be put in place as soon as possible," she said.


ken@heraldcorp.com