Cable cars: An economically viable public transport system in #AmLat cities?

Did you know that in 2004 in Colombia, the Mayor's Office of Medellín inaugurated "Metrocable", the first cable car in Latin America (and the world) that functioned as a means of urban transportation?  

Metrocable, in addition to connecting the marginal hillside neighborhoods of Comuna 13 with the city's metro system, demonstrated that cable car technology was viable as a mode of transport in mountainous or hillside urban areas, for distances of up to five kilometers. In the Latin American context, cable car helps vulnerable and predominantly low-income populations living in such sites, improving their urban conditions, and increasing access to job opportunities and other growth opportunities.  Following the successful case of Medellín, in several cities around the world this solution was implemented.

The relatively low cost of construction, ranging from US$19 million per kilometer, in cities such as Medellín and Mexico City, to US$32 million in Guayaquil, and its rapid implementation (for example, the 4.1 kilometer Guayaquil cable car took 24 months to complete) have led more than 18 cities, mostly in emerging economies, to opt for implementing cable car systems within their urban transport infrastructure.

In addition to the advantages in terms of mobility, urban cable cars do not take up large surfaces, enabling public entities to provide and improve urban facilities.  This generates socio-economic benefits in addition to those attributable to a transport project.

Image 1: The cable car system allows better use of public space due to its low-surface occupation. (Source: The World Bank)

Why choosing this solution?

In the last years, public authorities and private actors have tried to understand business models used for this solution and variables that affect their success.

Faced with a growing interest to implement this system, the World Bank published in 2020 the study "Urban Aerial Cable Cars as Mass Transit Systems. Case studies, technical specifications, and business models". This is the first publication that brings together objective data on 21 urban cable cars projects, both in Latin America and other countries around the world, and includes a description of the main characteristics of the infrastructure, travel demand, and the business model adopted for their construction and operation.  

The Bank's analysis documented the cable car-gondolas technology systems, their relatively low implementation complexity, and found that the equipment supplier market (cabins and electromechanical equipment) is dominated by a limited number of European manufacturers.

Given this particularity of the supplier market, the Bank's analysis suggests that a decisive element for the success of these projects lies in the choice of the business model used for both construction and operation. Reviewing the inventory of modern urban ropeways, we found the following business models:

1. The Public works model, which is put out to tender the execution of works, with state operation and maintenance.

The La Paz and Medellín systems are in this category. La Paz has the most extensive urban cable network in the world, with 10 lines, more than 30 kilometers of extension, and an average of 160 thousand passengers per day. Medellín, on the other hand, has a network of 5 lines with about 12 kilometers of extension, and 40 thousand passengers per day. 

Image 2: Cable car network in La Paz, city with the most extensive cable network. (Source: Miteleférico)

2. In the PPP - public-private partnership – model, the concession for the service’s construction, operation, and maintenance are in charge of a private entity.

This model, more recently disseminated around the world, this model is used in places such as Mexico City, Guayaquil, and the Kuélap cable car in the Amazon region, which is used for tourism purposes. In the case of Mexico, a minimum daily income was set according to the number of tickets sold. In the case of Mexico City, a 30-year concession contract (design, construction, operation, and maintenance) was established. The operator repays its investments through fare revenues, for which a minimum daily revenue was set for the operator based on the number of passengers so that the concession receives a minimum revenue guarantee.

3. Traditional public works contract with a private operator.

Bogotá and Santiago de Chile cable cars are examples where this alternative has been chosen. The case of Bogota, with only 4 stations and 3 kilometers of extension, proposed a 6-year operating concession, in which the operator is paid for the availability of the service (eliminating commercial risk). As in Medellín and Mexico City, the cable car connects directly to the city's mass transit system (Transmilenio).

In Santiago, Chile, the Parque Metropolitano cable car has shown positive results. Inaugurated in 1980, it ceased operations in 2009 due to certain mechanical failures. The service was put back into operation in 2016 through a concession. The system is for tourism purposes and as such, the concessionaire sets ticket prices that allow balancing revenues with operating costs.

Image 3: Some variables influencing the success of this cable cars system. (Source: IDOM-SEMSA)

What would work in Lima?

Based on international experiences, the Bank, with support from the IDOM-SENSA consortium, evaluated alternatives to recommend a possible business model for the San Juan de Lurigancho cable car in northern Lima. The analysis reviewed the legal framework, commercial viability, and simulated the project's potential financial flows. It also performed a risk analysis of the project. 

According to the model analyzed, and the supplier market, the study recommends decision-makers to evaluate public works schemes that allow them to have control over the construction of the project. The assessment results also suggest conducting a multi-criteria analysis that weighs variables such as value for money, risk allocation, and quality of service, to evaluate public or concession operation schemes.

In short, it is important not to stick to a basic project execution model. Instead, it is advisable to identify models used internationally and to study viable options for a specific project. This planning phase will allow managers to select a business model that meets the criteria of cost, value for money, risk allocation, speed of execution, and quality of service.