Delay repay: how do TOCs recover the cost?

anme said:

Could you explain why you think a ToC will *not* account for delay repay in its financial planning, as you appear to be arguing when you say "As you've been told several times, they don't balance off delay repay against anything, it is just an operating expense."?

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How is treating delay pay as an operating expense not accounting for it in its financial planning?

Deerfold said:

How is treating delay pay as an operating expense not accounting for it in its financial planning?

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Yes that is exactly my point. Delay repay is an operating expense, just like drivers' salaries or electricity to run the trains. It must be covered by income such as fares and subsidies.

Some people don't seem to agree with that for reasons I cannot yet understand. See for example post 25 in this thread. Delay repay WILL be balanced out against income one way or another and therefore will have an effect - large or small we can't say - on things like fares and subsidies.

anme said:

Yes that is exactly my point. Delay repay is an operating expense, just like drivers' salaries or electricity to run the trains. It must be covered by income such as fares and subsidies.

Some people don't seem to agree with that for reasons I cannot yet understand. See for example post 25 in this thread. Delay repay WILL be balanced out against income one way or another and therefore will have an effect - large or small we can't say - on things like fares and subsidies.

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And at that point, I will agree with you - it is part of the cost of the business.

Where we will differ is in our interpretation of what that means. My view, as a consumer and with (non rail) commercial experience, is that the direct financial cost of Delay Repay will be offset by the combination of business retained, new business secured through word of mouth and reduced need to persuade new customers to use that company. Your view appears (and my apologies if I misrepresent it) to be that this involves money "leaving the system", and is therefore a bad thing.

I have deliberately omitted Section 8 payments from the above - they are separate and distinct, and compensate the operator for the costs (which may include Delay Repay) incurred as a result of an operator being prevented from being able to run according to timetable.

Both mechanisms, however, should and must have some bearing on how companies decide to invest. They put a cost on something that is otherwise difficult to cost, and therefore easy to ignore. For an operator, it is easy to hide behind the terms and conditions. For Network Rail, it's easy to focus on the costs of making the network more reliable, and miss the importance of that expenditure. In my business (IT Services), the possibility of having to pay Service Credits is a powerful motivator to make sure the service is right, and that staff and equipment are working as they should. I see no reason why that shouldn't also be true in the rail industry.

anme said:

Yes that is exactly my point. Delay repay is an operating expense, just like drivers' salaries or electricity to run the trains. It must be covered by income such as fares and subsidies.

Some people don't seem to agree with that for reasons I cannot yet understand. See for example post 25 in this thread. Delay repay WILL be balanced out against income one way or another and therefore will have an effect - large or small we can't say - on things like fares and subsidies.

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I agree that Delay Repay is an operating expense and that ultimately 'the railway' gets its income from the farebox and subsidy. From a financial point of view delay repay means there's a lower profit so the shareholders end up with less money.

anme said:

Yes that is exactly my point. Delay repay is an operating expense, just like drivers' salaries or electricity to run the trains. It must be covered by income such as fares and subsidies.

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If that's your point why were you complaining when someone else described it as an operating expense?

It's an expense that must be covered. However, subsidies will not increase if delay repay is high. Increasing fares (those that are permitted to be increased) looks like a poor business model if you've high delay levels. Presumably the best business strategy will usually be to try and minimise Delay Repay levels.