Hunter bus industry figure blames bureaucracy as Labor vows to investigate Keolis Downer over bus cancellations

After a briefing from Transport for NSW bureaucrats, the new Transport Minister, Jo Haylen, has hit out at what she says is "a massive number of bus cancellations" she blames on "financial incentives to cancel services" embedded in contracts between bus operators and Transport for NSW.

Ms Haylen said these cancellations included services in Newcastle.

Newcastle MP and Minister for the Hunter Tim Crakanthorp said privatisation had made a mess of the city's bus service and the government would be "going through the contract with a fine-tooth comb".

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The Herald was unable to obtain comment from Keolis Downer yesterday, but the former owner of another Hunter bus service said he had heard nothing about Keolis Downer using Sydney-style gaming tactics.

Aaron Lewis, whose family owned Cessnock's Rover Coaches for almost a century before selling late last year, said the problems in the industry had grown in recent years, with big multinational companies - some without direct bus experience - buying into the industry and doing whatever they could to maximise returns, regardless of the impact on services to the public.

"There are players coming into this game who are not traditional bus operators but they are very smart when it comes to contracts," Mr Lewis said.

"Fines or abatements cease after a certain number of failures so you could argue that further failure is free.

"They have sat down with their bean-counters and realised that they can do this, even though it means leaving people on the side of the road."

Mr Lewis said that while it was the bus companies themselves doing it, he said the NSW government transport bureaucracy had allowed the situation to develop in the first place.

He described it as a "slow boiling" problem that had become obvious with the change of government, when the new transport minister, Jo Haylen, began to be briefed on what was happening.

Keolis Downer won an integrated contract in 2016 to run the buses, Stockton ferry and Newcastle light rail, and the public version of the 344-page document gives detailed descriptions of the various key performance indicators (KPIs) that apply in Newcastle.

Under the KPI system, bus operators must pay the government for breaches of agreed benchmarks, but Ms Haylen says that "bus services that are cancelled do not count as late", and that penalties for cancellations are capped in number, meaning "companies make more money if they cancel a bus that might run late".

On figures revealed so far to the new government, 28,000 services were cancelled in one month alone in Sydney, which has 15 bus contracts in total. The outer metropolitan area, including the Hunter, has another 12.

The Herald asked Transport for NSW about the supposed financial incentive to cancel services, but its response did not address the question directly, saying only that the organisation was working with bus operators to resolve problems and to "improve performance across the bus network, including reducing cancelled services and improving on-time running."

Transport for NSW on-time running data from 2016 onwards shows most regional operators hitting the 95 per cent benchmark, although Newcastle Buses dipped briefly below 90 per cent for two months in 2018.

Financial information - including the amounts that Keolis Downer would have to pay the government if it did not meet its targets - are redacted from the public version of its contract, but the KPIS are understood to correspond with those in use in Sydney.

Mr Lewis said Transport for NSW was "obsessed" with getting the lowest possible bids from bus companies to run the various service areas, but without sufficient attention to whether the companies could actually provide the services they were contracted for.

"Or whether multinational incumbents are performing well in their existing regions," Mr Lewis said.

He said the present state of the NSW bus system emerged from a review conducted in 2004 by former Labor premier Barrie Unsworth. He said that after the Unsworth review, existing family operators had to negotiate to stay in the industry.

"People talk about privatisation but we were already a privately owned and run industry except for the State Transit Authority (STA) in Sydney and Newcastle metropolitan regions," Mr Lewis said.

"Now they have been tendering STA regions which get won by multi nationals and equity fund backed operators. Unsworth paved the way for the privatisation of bus services including Newcastle, but it also put private operators on similar government contracts."

Mr Lewis said the bureaucratic determination to see on-time running kept above 95 per cent made the services look good on paper but the on-road reality was a different picture.

He said that during the wet weather late last year that caused widespread flooding in the Hunter, Rover Coaches had done everything possible to keep services running, in some cases having to detour more than 20 kilometres off the normal routes to reach where they needed to go.

He said this played havoc with Rover's on-time running performance, and the company had told Transport for NSW about the situation.

"And then, lo and behold, just as we're getting to the handover stage of the sale, we get a statement from Transport saying we have breached the on-time running and that we have to pay a fine, actually called an abatement or reduced payment for the month." Mr Lewis said.

"We paid it, because at that point it wasn't worth fighting for the $3000 or whatever it was, but we could have simply not run the services, and because that isn't penalised in the key performance indicators (KPIs) the way that on-time running is, the government wouldn't have said anything.

"But that's not how you run a bus service. Or it's not how we have run Rover Motors for the 97 years the company has been going, and it's not the way that the other family operators that I know run their businesses."

The state of the bus system was canvased by an upper house inquiry into bus privatisation that reported in September last year, with the former Coalition government responding in December.

The Coalition had rejected the inquiry's main recommendation, to consider unwinding the privatisations, but the new Labor administration promised a review of the system during the election campaign.

The 2022 inquiry looked at the future electrification of bus services, and Mr Lewis said Transport for NSW was "saying to the smaller operators, you don't have the financial capacity to absorb the cost of electrifying your bus services - that's one of their justifications - and they are forcing people out.

"They didn't run the electric argument with us, but I know one operator in Sydney who believes in electrification, had begun to install the infrastructure to convert, out of his own pocket, and he still lost his contract," Mr Lewis said.

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