KORAIL chief signals 1st fare hike in 15 years amid mounting debt

Korea Railroad Corp. (KORAIL) CEO and President Kim Tae-seung speaks during a press conference in Gwangju, Thursday. Courtesy of KORAIL

GWANGJU — The new head of state-run railway operator Korea Railroad Corp. (KORAIL) said Thursday that the company’s worsening financial situation will require a fare hike in the future — the first in 15 years — as its debt has surpassed 21 trillion won ($14 billion).

KORAIL CEO and President Kim Tae-seung, who took office in March, said at a press conference that current fare levels are insufficient to cover costs for the company’s 30,000 employees and the operation of the country’s high-speed rail system, KTX.

“We’re now under a huge financial pressure, especially as we will provide a 10 percent discount and a 5 percent mileage bonus to users of KTX and SRT when we launch our integrated service with SR in September,” Kim said, referring to the country’s other state-run operator of high-speed rail service.

“But we’ll first have to earn the public’s consent. The National Assembly and ministries will also have to support us for that.”

The financial strain also threatens the company’s plan to replace aging train cars, a costly project. According to Kim, 46 trainsets of the earliest KTX-1 model will reach the end of their 25-year service life in 2029, and replacing them with new trains of the same model is estimated to cost about 5 trillion won.

“We cannot afford such a large sum under our current financial conditions — not without the government honoring its policy to cover 50 percent of the costs for any newly built railway or newly introduced train model,” he said.

Kim added that he will discuss public service obligation (PSO) with the central government. PSO is a policy under which the government keeps essential public services running whether they earn money or not.

Korea Railroad Corp.’s KTX-Sancheon train, left, and SR’s SRT train are coupled inside the Honam Train Vehicle Maintenance Workshop in Gwangju, Thursday, ahead of planned integrated passenger service. Courtesy of KORAIL

“I believe all of our rail routes should be covered by the PSO, as in Europe where the policy is already in place. However, that would place a significant financial burden on the government,” he said.

The conference took place a day before KORAIL and SR jointly rolled out a connected KTX-SRT formation at Seoul Station as a test service, nearly doubling seat capacity. The two firms first tested the connection in February and confirmed its technological feasibility.

The integration process — which will erase “SR” from all high-speed trains and brand them as “KTX” is “going smoothly,” according to Kim.

“The integration will unite the two companies’ organizations, operation systems and digital platforms. It will be a historic achievement merging two tracks the two companies have been running separately for the past decade. It will evolve rail into Korea’s most critical land mobility for not only passenger travel but also cargo transportation,” Kim said.

He added that KORAIL will introduce 330 more carriages to provide more seats. The carriages were requested from Dawonsys, a train manufacturer here, but have not been received yet despite the deadline passing. The delayed supply grabbed the attention of President Lee Jae Myung, who ordered an investigation into Dawonsys.

“We’ll place an order for 146 new carriages this July. We’ll order the rest next year. Because of the carriage shortage, we have hosted an emergency auction to invite companies to renovate our aged Mugungwha trains. It is a shame it has come to this,” Kim said.