Part of my work today involves farebox recovery rates on the local bus routes. Most routes in the system fall between 10% and 30%. The best route achieves 37%, and the worst route is 3% (and that figure is a bit dated--probably lower, around 1%, after recent service cuts)
...which is the sort of messages your fares send to your riders. The current base fare is $1.25, regardless of distance. If everyone in the system made the same trips they did last year but paid, say, $5 as the base fare, we would've made money. But if fares were *actually* $5...
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...then the message we would send our riders is "don't take the bus unless you're going a pretty serious distance: it's not worth it for short trips around town, or for going one town over." Not good! The sort of trips discouraged would be precisely the cheapest to provide!
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The current fare of $1.25 is actually reasonable for short distances--but it's hopeless to cover costs of longer trips. So, a distance-based fare system is of the utmost importance! This is why bus systems in Japan tend to rely on them.
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