Case Study: Public Transport in Helsinki Metropolitan Area

The case has two parts. Part 1 describes the arrangement and financing of the public transport services for 900,000 inhabitants in the Helsinki metropolitan area. The statutory YTV Helsinki Metropolitan Council was responsible for traffic across the municipal borders. It bought services from a number of bus companies. The contracts were awarded without competition, and the 'rise of costs' was compensated. The ticket revenue covered two-thirds of the costs, and the rest was paid by tax revenue. The ticket prices were rising.

In 1994, the Council offered 20% of the regional services for competitive tendering. The prices dropped on the average by 33.2%. Through three additional rounds of auctioning in 1995 to 1996 all the services were auctioned. Annual costs were reduced by 29.2% and the quality of service improved. The ticket prices could be reduced. Proposals were made to extend the competitive tendering to the internal public transport of the municipalities as well.

Part 2 describes the escalating labour market conflict that arose due to the deteriorating job security of drivers. If their company lost a tender, the drivers were laid off due to lack of work. The company that got new business could employ them, but as new employees. The drivers lost benefits. The Union tried to negotiate with the employers but without results.