"Rail Fares Frozen for 14 Years, Why Is Korail President Taking the Lead to Raise Them Now?"

Han Moon-hee Stresses Necessity of Rail Fare Increase
Aging Trains and Soaring Costs Leave No Room for Further Delay
KORAIL Faces Mounting Debt and Urgent Need for Replacement Vehicles
Experts and Government Also Recognize Need for Fare Adjustment

"If we had gradually raised (rail fares) over 14 years, the shock to the public would have been less, but as it has been delayed continuously, we are now in a situation where we have to raise fares all at once. The increase rate is high, so it inevitably becomes a burden."

Han Moon-hee, President of Korea Railroad Corporation (KORAIL), repeatedly emphasized the necessity of raising rail fares during a meeting with reporters on the 25th. The head of a public institution, which must undergo annual management evaluations, openly making remarks that might upset price control authorities reflects the urgency that the delay can no longer continue. Massive funds are needed to replace aging trains. If left unattended, safety issues could arise. Rail fares have been frozen for 14 years since a 2-3% increase in 2011.

KTX train stopped at Seoul Station. Photo by Jinhyung Kang aymsdream@

High-speed rail began to be introduced around 2000, ahead of its official opening in 2004. Considering that the typical lifespan of trains is about 30 years, it is time to prepare replacement vehicles. KORAIL expects to place orders in 2027 and receive trains around 2034. More than 5 trillion won will likely be needed to introduce replacement vehicles. While urban rail can receive national subsidies, KORAIL bears the full cost for high-speed rail.

Despite this situation, rail fares remain unchanged. Compared to 2011, when rail fares were last raised, the consumer price index has increased by 27%. Express bus fares, considered an alternative mode of transportation, have risen by 21%, and airline fares by 23%. The minimum wage has more than doubled since then. Electricity costs, which constitute a large portion of operating expenses, have increased from 205.1 billion won 14 years ago to 579.6 billion won last year, a 2.8-fold increase.

Compared to other countries operating high-speed rail, Korea’s high-speed rail is relatively inexpensive. Traveling 417 km from Seoul to Busan costs about 59,800 won, which is approximately 143 won per km. In Japan, it is about 257 won per km, and in Germany about 200 won per km. China is cheaper than Korea at around 100 won per km.

Raising rail fares requires a government decision. According to the Enforcement Decree of the Railroad Business Act, the Minister of Land, Infrastructure and Transport can set a ceiling by comprehensively considering inflation rates, fairness with other transportation modes, and cost levels. Within this ceiling, the specific increase rate and timing can be determined. It is reported that the Ministry of Land, Infrastructure and Transport, the competent authority, has some consensus on the necessity of fare increases.

Han Moon-hee, President of Korea Railroad Corporation (KORAIL), is speaking at a meeting with reporters from the Ministry of Land, Infrastructure and Transport on the 25th. Photo by KORAIL

KORAIL could also raise funds by issuing bonds. However, looking at KORAIL’s current financial structure, this is not an ideal direction. KORAIL posted an operating loss of 111.4 billion won last year, with a debt ratio of about 265%. Its accumulated debt stands at 21 trillion won, with interest expenses alone amounting to 413 billion won, roughly 1.1 billion won per day. Due to soaring electricity costs, the payment this year is expected to reach 640 billion won.

Experts also point out the need for fare increases. At a recent forum, an analysis suggested that to cover the cost of purchasing replacement vehicles through fares, prices would need to be raised by more than 25%. Internally, KORAIL considers a 17% increase appropriate when drafting business plans. Since fare increases are difficult, KORAIL is also discussing measures such as increasing the Public Service Obligation (PSO) compensation provided by the government or adjusting track usage fees.

President Han said, "Rail fare increases should be carried out together with the government, taking into account the national economy and consumer prices comprehensively," adding, "Just as we have stably operated the KTX under difficult circumstances, we will do our best to improve rail safety and services and uphold public interest going forward."

This content was produced with the assistance of AI translation services.