In this paper, we present a methodology for solving the Public Transport Network Design Problem (PTNDP) and describe its application in the context of the Design Study developed in order to propose a new structure for the transit system of the city of Santiago, Chile. Firstly, we briefly define the PTNDP as a multilevel programming problem and discuss the solution method implemented. Then, the application of this methodology to the Santiago transit system is presented, and the main results obtained are analyzed. The new restructured system, based on a hierarchy of specialized services that complement and coordinate their operations and using an integrated fare scheme, is compared with an optimized version (optimal frequencies) of the current one, a set of direct services, mainly based on the operation of independent itineraries, without fare integration. The most important conclusions are the following: (a) the private operating costs and the social costs of the restructured system, using higher standard buses, are considerably lower than the costs of the current system; (b) these cost reductions allow government authorities to introduce ail important number of modernizing measures without subsidies and fare increases. (C) 2008 Elsevier Ltd. All rights reserved.