A cut-price rail service between London and Edinburgh, dubbed the Ryanair of rail, is on track to turn a profit after a year in service and has helped to reverse the airlines’ previous dominance of the travel market between the capitals.
Lumo, celebrating its first birthday this week, will announce that it is soon to carry its one millionth passenger during a year in which its average one-way fare has been less than £40, as much as half or two thirds the price charged by LNER, the incumbent train operator on the east coast main line, or the airlines flying the route.
It was set up last year as a so-called open-access operator, a niche train company operating outside the direction of the Department for Transport. It is owned by First Group, Britain’s largest train company, which also runs Avanti West Coast, Great Western and Trans-Pennine, and would have competed with Virgin East Coast before the latter was wound up and replaced by the state-owned LNER.
Lumo’s proposition is one-way prices from about £25 but capped, even at the times of highest demand, at £72. It operates five return services a day with stops at Stevenage, Newcastle and Morpeth. Lumo’s revenues in its first year have hit £35 million and Martin Gilbert, its new chief executive, confirmed that the operation’s breakeven target for its five-car, 400-seater trains to be profitable, running at an average of 60 per cent full, was “on track”.
Of Lumo’s success thus far, he said: “We have a value offer for the price sensitive and are attractive to students and older passengers but we are attracting business passengers too. We have opened up the route for people for the first time just by being cheaper than the alternatives previously available.”
Lumo has tried to woo the environmentally aware, claiming to offer low-emission travel on new, British-built electric trains, and with a marketing line of “Cure your flight shame”. “An ethical choice that appeals to a certain audience,” Gilbert said.
Lumo has limited rights of access to the rail network, which means that it is one twentieth the size of LNER. That could change should it moves to running longer trains to satisfy demand.
It claims that it has helped to bring about a dramatic turnaround in the air/rail share of the London-Edinburgh market. Analysis of Office of Rail and Road and Civil Aviation Authority data shows that before the pandemic, up against high-frequency air services by multiple carriers from multiple London airports, rail handled only 33 per cent of the passengers between the capitals.
With airlines and airports in operational disarray coming out of the pandemic and consumers ever more price conscious, latest quarterly data shows that rail has turned the tables to now claim 63 per cent of the market despite an average journey on the train of about four and a half hours, compared with an hour and 20 minutes by air.
Gilbert said that Lumo’s success was a victory for the open-access model and that niche private-sector competition should be encouraged. “It can provide customers with lower fares and more choice,” he said.
Many in the rail industry have called for more open-access operators across the network but only two companies have been able to establish themselves during the years of privatisation, both on the east coast main line: Hull Trains, also operated by First Group, and the Arriva-owned Grand Central, with services to and from Yorkshire and the northeast.
