Virgin got on and ran a train to Birmingham every 20 minutes as that's what the DfT told them to do. Virgin didn't write the VHF timetable. If you increase the fares then people will look at other modes. For a journey to London I doubt many would switch as the train is the only realistic option but this isn't the case for other routes where it's easy to go by car. Also if you did increase the cost of the cheapest fares then this wouldn't automatically result in cheaper walk on fares. People clearly do pay the full fare and as there is no realistic alternative to the train on the London route they will continue to pay it as so it wouldn't be a good commercial decision to reduce these fares as it would result in less revenue.
As OT has mentioned already, less people are buying the full fare tickets now, because of the large supply, and cheapness, of the advance fares. Advance fares are now available on the busiest of services.
If you stopped selling advance fares at peak times, and increased the price of them as well, then more of the full fare tickets would be sold. These people will always travel, as they have no choice. In fact, if you did this, you may also reduce overcrowding on the services immediately after peak time.
Also as OT mentioned, if price was such a large factor, then why dont we see more people travelling by coach?
Car travel also, is not always any cheaper than the train now. If travelling on your own, the train is nearly always cheaper, unless you are left with the full fare. Even the old Saver tickets (Off peaks) are usually cheaper than the car.
I can see why you are coming out with your point. Its the exact reason TOCs give for doing what they do. But in reality, it actually isnt the case.
Its just one of the ways of the system unfortunately. Virgin would prefer to sell advance tickets, because thats about the only way of ensuring they keep all of the money. If someone bought an off peak return from London to Birmingham, and intended to use Virgin. How much of that revenue do you think Virgin would see? Nowhere near 100%.
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It depends on the employee. If a director is getting paid £300,000/annum, then a £279 (soon to be £296!) SOR between London and Manchester could work out better value for the company than advances - this well-paid member of staff doesn't have his/her time fragmented waiting or worrying about departure times.
Surely the VHF timetable was intended to attract such a market, and that's the reason it runs through most of the day?
Another reasopn for the VHF timetable, is probably too ensure Virgin gets more of the revenue from ORCATS.
Plus to compete with the ever more popular Chiltern.
Also, as mentioned, with full fare tickets of that price, why not buy a number of advance tickets to cover all eventualities? Its cheaper than buying 1 full fare ticket.