One of the conundrums facing Great British Railways (GBR) is how to deal with price competition between different operators. The original privatisation structure encouraged this, and one way Train Operating Companies could increase their profitability was by introducing lower fares between stations primarily served by another company.
In many parts of the country there is of course no choice; if you want to travel from London to Manchester, Leeds or Cardiff, there’s only one operator, although open access operators are snapping at the incumbent’s heels for Cardiff, and London NorthWestern (LNW) is proposing to extend its Euston to Crewe service to Manchester Victoria. The LNW plan would provide useful new links for intermediate stations – but would DfT/GBR sanction LNW offering bucket shop fares between London and Manchester?
However, on some key routes there is real price competition. West Midlands to London is a prime example. Both LNW and Chiltern generally operate two trains an hour; Avanti used to operate three trains an hour but this was reduced to two for much of the day, partly because the two other companies have abstracted significant volumes from the faster Avanti services.
Since the pandemic, the revenue for all three operators flows directly to the Government, so the “competition” is essentially false. In some respects, it would be reasonable to remove the cheaper long distance fares on the two slower routes and concentrate West Midlands–London traffic on the faster Avanti services; Chiltern and LNW could then focus on serving their important intermediate stations. But presentationally this would be difficult unless the fast route offered the same cheap fares, which would reduce average yields and might lose overall revenue; there could also be a need to restore three trains an hour on the Avanti route.
There’s also the issue of modal shift. While Chiltern and LNW have undoubtedly abstracted revenue from Avanti, they have also grown total rail volumes on the route, winning passengers from coach travel (probably neutral in environmental terms) and from car, which is certainly environmentally virtuous. The cheap fares will also have grown the total transport market.
I came across another example recently when making a journey from Berwick to Edinburgh. The best train for us happened to be a TransPennine Express (TPE) service from Newcastle to Edinburgh. These trains were essentially introduced to provide services from the recently opened small stations at Reston and East Linton, as both LNER and CrossCountry were understandably reluctant to stop long distance trains at these places for penny numbers of people. I expected the TPE train to be very lightly loaded as there are frequent, faster trains on the route but it was almost full, so some of the passengers from the smaller stations chose to stand. It seemed pretty clear that TPE were carrying lots of people from Newcastle to Edinburgh at cheaper fares.
Driving from Newcastle to Edinburgh typically takes a little over two and a half hours. Whilst there are sections of dual carriageway, much of the route isn’t dualled and getting stuck behind a tractor, for example, is slow and frustrating, with limited opportunities to overtake because of the volume of traffic coming the other way. By comparison, the rail service is superb; there are no less than 54 trains a day, some of which are non-stop, with the majority stopping once; journey times are typically 90 minutes, and, as a bonus, the scenery is spectacular. So rail is probably the dominant mode for this flow.
There are four different operators, all offering their own fares. LNER is the most frequent and typically the most expensive; Cross Country provides an hourly service and is priced a little lower than LNER, while the five daily TPE trains are cheaper still. The only genuinely private sector operator is Lumo which is incentivised to fill Newcastle–Edinburgh seats available after Kings Cross–Newcastle passengers have got off. Prices in the middle of the day two weeks ahead range from £25.10 to £15.90 one way.
So, despite the demise of full private sector franchises, it’s clear that passengers still get real benefits from ‘competition’ on at least some parts of the network. What’s not clear is whether this results in a higher level of subsidy overall or if a range of different service offers and prices in fact delivers higher net revenue for the industry. It’s certainly not clear that LNER has been seriously damaged by its open access competitors.
It’s all a bit murkier south of the Thames. Gatwick Express, Southern and Thameslink were all merged into one franchise (GTR) in 2015, with DfT taking the revenue risk from the start. Despite this, the fares structure hasn’t been changed; there are still significantly cheaper ‘Thameslink’ fares, and Gatwick Express is still priced as a supposedly premium service. It’s unclear what happens if, say, a peak Thameslink branded service is cancelled from Brighton – are passengers permitted to catch the following Southern or Gatwick Express service without buying a new ticket or paying a surcharge? It is after all part of the same operation.
The position at Gatwick Airport is close to scandalous. At the start of privatisation, John Swift, the first Rail Regulator, took the view that ‘impartial retailing’ was essential – by implication, every passenger wanting to travel from Gatwick to London would have had a Socratic debate with the booking clerk, who would be obliged to present all the options and prices for travel to London. This was of course totally unrealistic but the present situation at the Airport perhaps owes more to Arthur Daley than to Socrates.
There is now no booking office at the station, just a vast rank of ticket machines. The front screen of these offers in the top left, a London Victoria fare at the Gatwick Express price (£23). Lower down the page there is a London Terminals fare at £20.40 and at the bottom a “London Thameslink” fare (£14.40) which to many passengers, especially non-UK residents, will mean nothing. So the default sale is for Gatwick Express, now only half hourly and no longer in any meaningful sense a premium service, even though three quarters of the trains to Victoria are Southern services, with journey times only 2/3 minutes longer than the Gatwick expresses. Essentially, passengers for London are paying at least £2.20 than they should or £8.20 more than for Thameslink, which if they understood it would be a better option for many.
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The Secretary of State has or will be writing to three key executives tasking them with starting the process of creating Great British Railways in advance of legislation. All three are good people and this is a positive step but I can’t help thinking that ‘Haines, Hynes and Gisby’ sounds like a firm of small town solicitors!
Photo credit: Paul Bigland.
