Selling Station Names in Seoul Subway... 'A Drop in the Bucket' for Financial Deficit

The substation name of Euljiro 3-ga Station on Line 2 is Shinhan Card Station. Photo by Intern Reporter Kim Gunchan kgc6008@asiae.co.kr

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[Asia Economy Intern Reporter Kim Gun-chan] Seoul Metro, under the Seoul Metropolitan Government, has launched a project to add private companies' and institutions' names alongside subway station names to address financial difficulties. However, experts point out that fundamental solutions such as reforming the free ride system and adjusting fares to realistic levels are necessary.

According to Seoul Metro on the 16th, the company started a paid "station name co-naming" project on the 5th, adding corporate and institutional names to 50 stations across Seoul Subway Lines 1 to 8. "Station name co-naming" refers to adding secondary names to existing subway station names. Currently, 30 subway stations, including Euljiro 3-ga Station on Line 2 (Shinhan Card Station) and Jonggak Station on Line 1 (SC First Bank Station), have secondary names. Notably, the stations targeted for co-naming include Gangnam Station, the busiest subway station nationwide, and major transfer stations such as Yeouido, Gongdeok, and Sindorim Stations.

Seoul Metro's decision to expand the station name co-naming project despite concerns about damaging public interest is seen as a desperate measure to resolve the accumulated financial deficit from subway operations. Jung Sung-in, head of Seoul Metro’s New Growth Headquarters, explained, "There are concerns that the station name co-naming project could harm the subway's public nature, but only suitable companies and institutions will be selected through a review committee." He added, "This project will also help alleviate the company's financial difficulties."

However, industry consensus holds that this project cannot be a fundamental solution to Seoul Metro’s nearly 2 trillion won financial deficit. According to data presented by Professor Ko Hong-seok of the Graduate School of International Urban Sciences at the University of Seoul at a policy forum titled "Sustainable Urban Rail Management: How to Solve Urban Rail Financial Deterioration?" held last September, Seoul Metro’s financial deficit nearly doubled from 586.5 billion won in 2019 to 1.1137 trillion won in 2020. It is estimated that this figure increased to 1.7 trillion won last year.

The massive financial deficit is attributed to the rapid increase in free rides by the elderly population due to aging and the freeze on subway fares. The population aged 65 and over in Seoul, which was about 1.1 million in 2012, rose to approximately 1.56 million in 2020, accounting for 6% of the total population of Seoul. Subway fares have been frozen for seven years since the last increase in June 2015.

To make matters worse, revenue from transportation was hit by reduced mobility due to COVID-19. Seoul Metro’s transportation revenue, which was 1.6714 trillion won in 2019, plummeted by 27% to 1.2199 trillion won in 2020, when social distancing measures were fully implemented.

On the other hand, income generated from the station name co-naming project is minimal. Seoul Metro is reported to earn about 2 billion won annually from this project. Even combining the 50 stations newly included in the project, the total income is around 14 billion won. Although Seoul Metro operates various ancillary businesses such as subway advertising besides station name co-naming, the consensus is that these are insufficient to cover the astronomical deficit.

Professor Kim Woo-cheol of the Department of Taxation at the University of Seoul said, "While various ancillary revenues are desirable, they are insufficient to solve the operating deficit problem. The fundamental solution is to reform subway fares." He also added, "It is necessary to reduce the scope of elderly preferential policies and consider measures such as making free rides available only outside peak commuting hours."

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