Tuesday, 16 August 2011

More on UK Rail Fare Increases

Lots of media coverage today - August is always a poor month for news - and all the usual vox pop of the "Why should we pay more for a service that's no good?" variety.  The Transport Ministeress is dragged in front of the cameras to explain that it's part of the government's plan to ensure more money is available for improvements.  Of course, it's all spin.  Really they re just trying to price people off the trains to reduce overcrowding.

While all this was going on, I was emailed by a gentleman who had read my page on railway finance, and he made some good points as follows:

Him: If one takes the UK example where railway infrastructure is nationalised.  Then the operating companies do seem to get government subsidies Plus fares. 

Me: Correct

Him: So under the above approach the operating firms seem to make money and continue to charge above inflation RPI every year. 

Me: Yes, but the government reduces their subsidy by the "over RPI" amount in order to reduce the taxpayers' contribution.

Him:  So that doesn't feel on the face of it that these private operating firms are finding any efficiencies that they return to the customers in lower prices at least. Maybe just their shareholders in dividends and stock market value?

Me:  They will have a business plan that trades off their returns to encourage passengers to buy tickets and those to shareholder dividends.

Him:  How could you compare one Uk operating firm to another to know which are being run better or worse?

Me:  Depends what you mean by "better or worse".  A financially good performer may only do so by providing a poor service to passengers.

Him:  Certainly it would seem ticket fares should reflect distance travelled more than they currently do.

Me:  They price tickets by yield management, just like the airlines.  For railways it's largely based on time of day and advance or walk-up purchase.  

Him:  I would say some sort of outcome measure is best...Better for me would be best defined as an average cost to travel per mile across there relevant piece of the network. Maybe spilt by peak and off peak. That combined with the existing punctuality measures should cover it.

Me (to everyone): For a reality check, remember that only 8% of land journeys in the UK are by rail.  If you turn that into votes, the loss of votes to the government is in "the noise".  It doesn't matter to them.

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