MTR in Hong Kong is probably the best-run metro in the world and that brand is what they bring with them

Updated September 17, 2013, 1:00 p.m. ET

Hong Kong’s MTR Rides Toward Expansion

Company Makes Tracks Toward Becoming World’s Top Metro-Train Operator

JEFFREY NG

A subway system with a 99.9% on-time rate would be a source of pride in most cities. In famously efficient Hong Kong, it elicits an explanation from the director of operations: “Zero delay is difficult to achieve on any railway system,” he said in a recent service update. Hong Kong’s MTR Corp. 0066.HK +0.82% is taking its high standards abroad, bidding to run subways in Europe, Asia and Australia. If it wins just a few of the bids, it will become the biggest operator of metro systems in the world. Led by a New Yorker, it is also considering other projects, even in Germany, another place that places a high value on efficiency. “MTR in Hong Kong is probably the best-run metro in the world and that brand is what they bring with them,” says Nigel Harris, managing director at the Railway Consultancy Ltd., a U.K.-based firm.The train operator, which exports even its trademark door chimes and train-service announcements, already runs lines in the Chinese cities of Beijing, Shenzhen and Hangzhou, as well as in Melbourne, London and Stockholm. It has been short-listed to run a train line in Sydney and three more lines in London, including Crossrail, one of the biggest rail projects in the city in decades.

Leading MTR’s global expansion is Chief Executive Jay Walder, a Queens, N.Y., native who attended a state college before graduate school at Harvard. He was recruited away from New York’s Metropolitan Transportation Authority, which operates the region’s mass-transit system, with the promise of a significant raise and the chance to run one of the world’s best subway systems, rather than an aging operation run under tight budget constraints. Mr. Walder left his post as MTA chairman and chief executive in 2011 to become CEO of the Hong Kong system early last year.

“To run the transit system that is truly at the top of the world-wide league table was a very special opportunity for me,” said Mr. Walder, who was paid about US$1.56 million in salary and bonus last year, more than four times his US$350,000 annual paycheck at the MTA.

Cities rarely outsource the running of their subway systems, and MTR is one of the few metro operators to manage a significant number of metro systems outside its home base, said Peter White, a professor of planning and transport at London’s University of Westminster.

MTR stands apart from its competitors for other reasons. It is publicly traded and consistently profitable without any direct government support. Those profits come from another unique characteristic: MTR profits from developing the land above and around its stations, allowing it to benefit from the city’s booming real-estate market. That land comes from the Hong Kong government, amounting to an indirect subsidy.

The rail operator is 77%-controlled by the government, meaning it is ultimately owned by Beijing, though Hong Kong retains its own government and legal system. MTR made an underlying profit of 4.25 billion Hong Kong dollars (US$548 million) in the first half of 2013, up 5.1% from a year earlier. Just 10% of the profit came from overseas.

MTR’s biggest selling point is its own operations. It has consistently delivered a 99.9% on-time ratio while carrying 5.1 million people on an average weekday, ranking it as the 10th-busiest subway system in the world. Despite a relatively modest scale, with tracks spanning about 120 miles, it carries roughly the same number of people at systems in London and New York, which have more than 200 miles of track.

The trains are clean and appear as frequently as every two minutes at major stations during rush hour. In the past year, MTR added 1,200 train trips a week to ease crowding, a chronic complaint.

The systems MTR runs overseas don’t match its standard of punctuality at home, but are close. At MTR-operated London Overground, a suburban rail service, 96.7% of trains operated on time over the past 12 months, compared with a rate of just 88.4% in 2007, before an MTR joint venture took over operations. On-time performance at Melbourne Metro rose to 93.7% in August from 84.6% when MTR took over in 2009.

Combining its Hong Kong and overseas operations, MTR carries about nine million people each weekday. Its global ridership totaled 2.61 billion people last year, just below the 3.1 billion riders who traveled on Tokyo’s subway system, the world’s busiest. The Seoul subway system, the world’s second-busiest, recorded ridership of 2.52 billion last year, according to data from the MTA.

For all of MTR’s success, it is constrained by Hong Kong itself. While it has five new lines or extensions under development—including a high-speed rail line to mainland China and another that bores through a mountain—they won’t add significantly to its passenger traffic.

The system’s biggest expansion will likely come from China and London. “In China…we will see a deeper footprint in cities where we are already in and broaden our footprint to other cities,” says Mr. Walder, 54 years old. MTR already carries more than one million passengers a day on one Beijing subway line, while a second line it runs is only partially complete.

A bigger presence in London is also somewhat of a homecoming for MTR, which was set up in the 1970s when Hong Kong was a British colony. Over the years, a number of MTR’s top executives have ended up leading London Underground and other British rail companies.

“The British people who ran Hong Kong built the MTR as [what] they wished the railways in London would have been if they had been built properly,” said the Railway Consultancy’s Mr. Harris.