The Secret Worldwide Transit Cabal

Informed but opinionated commentary and analysis on urban transportation topics from the Secret Worldwide Transit Cabal. Names have been omitted to protect the guilty.

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Tuesday, September 03, 2002

TOKYO -- Tokyo Monorail (aka "Tokyo-Haneda") -- PART THREE (Monorail 16)

From the Cabalmaster:

We opinionated TransitCabalists are frankly skeptical of longtime claims that the Tokyo Monorail is "profitable." We accept this as true within the context of Japanese business practices -- but few would scramble to invest in a similar facility on this side of the Pacific.

Prior to the recent reorganization (below), the Monorail returned an operating surplus equal to 17 percent of revenue. Most of Japan's 15 "large" non-JR private-secor railways (i.e. those established prior to the breakup of the nationwide Japanese National Railway network) return "net profit" equal to 2-12 percent of revenue. These "net profit" ratios are, of course, lower than the ratios of operating surpluses to revenues.

However, the Tokyo Monorail had a rather small "capitalization" relative to the value of its facilities. In nominal terms, this amount represented 14 percent of the cost of building and equipping the line. If adjusted for inflation, this percentage would fall considerably. This suggested a substantial amount of liabilities, or debt -- which recent .

In addition: Tokyo Monorail Co, Ltd., exists as a separate corporation, all but stock is held by Hitachi Transportation Systems, Ltd. There are almost no other "private-sector" railways in Japan whose stock is held by a single investor. This suggested some degree of "supplier financing." (The Monorail accounts for less than one percent of the annual revenues of the parent enterprise, Hitachi, Ltd, the largest private-sector employer in Japan with about 320,000 staff members. See:

The "Japan Company Handbook," a semi-annual publication by Toyo Keizai Co, Ltd (see:, provides the following information:

". . . in Japan it is common to give and receive inter-corporate credit by means of notes."

"There are some company whose 'Shareholders' Equity' is a minus value. This signifies that the accumulated loss is so large that liabilities are in excess of assets. If the liabilities exceed assets for three years in a row and, moreover, if a dividend is not declared for five years, the company will be struck off the stock exchange."

We conclude that the Tokyo Monorail Co, Ltd, was in many respects a self-supporting "showcase" for Hitachi-Alweg technology. We doubt that many American investors -- other than monorail buffs -- would be interested in such a venture.

The new East Terminal building at Haneda Airport is planned for completion in 2003. This will be served by a 0.5-mile Monorail extension, and by the existing Keikyu station.

The East Japan Railway ("JR-East"), one of the privatized regional successors to the Japanese National Railways (JNR) network, announced in December 2001 that it would purchase the majority of Tokyo Monorail stock from Hitachi Transport Systems. (See: See also:

JR-East was to purchase 70 percent of Tokyo Monorail stock for 7 billion yen (about $52 million). The remaining 30 percent was to be purchased by Hitachi, Ltd, parent of the Hitachi Group, for 3 billion yen (about $22 million). The decision to sell was prompted by high debt, and need for capital investment [renewal, perhaps?] that Hitachi was not eager to make.

At the end of 2001, the Monorail carried 140,000 passengers per day, down by 22 percent from that carried at 1997. Since completing its extension (or "re-extension") to Haneda Airport at the end of 1998, Keikyu has conducted aggressive marketing campaigns. Keikyu competition hurts JR-East as well as the Monorail, for 70-80 percent of Monorail passengers change to JR Yamanote Line trains at Hamamatsu-cho. The sale gives JR-East "access" to Haneda Airport.

We "opinionated ones" would say "control over its Haneda connection" is a more accurate description. The Monorail will continue to operate as a separate entity, although JR-East planned to revise the timetable to provide improved connections with Yamanote Line trains, and to sell discount tickets for trips to the airport.

We're also intrigued by other financial details. It looks to us like Hitachi Transportation Systems decided to unload the monorail. Liabilities (debt) were stated at 50 billion yen ($370 million). Compare this amount to the sale price -- 10 billion yen, about $75 million -- and the capitalization stated in a Japanese data book -- 3 billion yen, about $22 million. Note that the Hitachi, Ltd, "share" of the transaction is exactly the same as this "capitalization."

During the 2001 fiscal year, the Monorail earned 15.5 billion yen (almost $116 million) in revenues, and posted an operating profit of 3.05 billion yen (almost $23 million). But debt service reduced pretax profits to 150 million yen ($1.1 million).

We don't suppose that the neighborhood monorail buff wants you to ask: "If the Tokyo Monorail is so profitable, where did all that debt come from?"

Without attempting to adjust for inflation, the "nominal" construction cost of the original Tokyo Monorail line was 21.1 billion yen (20 million yen for infrastructure, 1.1 million for rolling stock). This is much more than the "capitalization" amount, 3 billion yen. It's obvious that a large share of the construction cost was paid with borrowed money, including most or all of the "infrastructure." The company's traffic rose by a factor of 20 between 1965 and 1997. That would have permitted debt financing of additional rolling stock (the line is now using its third generation of cars) and other improvements, steadily increasing the total amount of liabilities. One might call this the "" approach.

The days of steadily increasing Monorail traffic have ended. The national economy is mired in recession, and there is little prospect for short-term improvement. The long-term future does not look promising, since various new rail lines are planned to reach Haneda. Hitachi no doubt felt the squeeze. Things might improve under JR-East control, owing to improved coordination with JR trains, promotion as part of the JR metropolitan rail network, and through-ticketing arrangements.

We opinionated TransitCabalists point out that prospects for additional expansion are virtually nil.

We acknowledge the fact that the Tokyo Monorail is the world's busiest airport "rail" link, and will certainly remain in operation far into the future.

However, there is little doubt that the Monrail will become less important, gradually but steadily, as Tokyo continues to expand its conventional rail systems.

It's true that the monorail is faster, and cheaper, for passengers traveling to and from Hamamatsu-cho. Travel time from the nearest subway station (Daimon) is 28 min, compared to 22 min by monorail, and the combined subway-Keikyu fare is about $5, compared to about $4 by monorail.

However, Hamamatsu-cho is not a major "destination." The Monorail's cost and time differences disappear for passengers continuing north to major destinations such as Shimbashi, just one minute north of Daimon by subway or (two minutes by JR Yamanote Line from Hamamatsu-cho). Through trains from the Keikyu network continue over subway tracks to major destinations such as Ginza and Asakusa, then by connecting railways to points as far as Narita Airport. Although there are no direct trains to points south, Keikyu provides convenient connections at Keikyu-Kamata station to Kawasaki, Yokohama and other destinations.

The Tokyo Monorail once planned extensions from Haneda to Yokohama (11 miles) and to Kamata (2.5 miles), but did not secure authority for these. The company relinquished its license to build northward from Hamamatsu-cho to Shimbashi in 1966. JR-East announced that it would study a Monorail extension to Shimbashi. This would provide better connections with various JR services, but would also be extremely expensive to build, and for this reason we doubt that this proposal will advance.

Additional rail services will reach Haneda within the next decade. A new subway line, paralleling the west side of the Yamanote loop to serve major centers such as Ikebukuro, Shinjuku and Shibuya is under construction, and is planned for completion by 2007. This will connect at Shibuya with the Tokyo Express Electric Railway, permitting regional through services from northwestern points to Kawasaki, Yokohama . . . and Kamata. A short connecting link to the Keikyu line is planned as a medium-term project. Through service to Haneda Airport would require either dual-gauge track (Keikyu uses standard gauge; the new subway will use 3'6" gauge) or perfection of "free-gauge" rolling stock that can pass between lines of different gauges while in motion. Long-term projects include passenger service on an underground freight bypass near Haneda Airport, and a new "middle-peripheral" rail line that will eventually reach Haneda. All of these projects will use conventional rail technology.

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