Are rail fares influenced by the cost of running the trains?

[JDi]

Moderator note: split from Are diesel powered or electric powered trains cheaper to run?

If one power method is significantly cheaper, are these savings passed on to passengers? I understand that this would be possible with advance tickets where the TOC would know which powered train would run the journey and could price accordingly, however, what about walk-on tickets? Is the average price taken?

This question is perhaps most relevant to lines that are served by a TOC that operates both diesel and electric trains on the same route.

 

[Jordeh]

It's cheaper to run and maintain electric trains.

A good example of a TOC running a fairly even split of electric and diesel trains would be Virgin Trains East Coast. However there is no difference in prices as this would only make an already confusing ticket system even worse. There is sometimes changes in what runs anyway.

Ticket prices rarely reflect the exact cost of running a train for a multitude of factors.

 

[JDi]

It's cheaper to run and maintain electric trains.



Ticket prices rarely reflect the exact cost of running a train for a multitude of factors.

How come? What would you say the true cost of a journey per passenger is compared to the amount actually charged?

 

[JDi]

Ticket prices rarely reflect the exact cost of running a train for a multitude of factors.

Sorry @Jordeh , I just meant to quote you for this question.

 

[HarleyDavidson]

Electric trains are cleaner, quieter, faster, usually a bit lighter too which means less energy is used.

 

[JDi]

Electric trains. They're cleaner, quieter, faster, usually a bit lighter too which means less energy is used.

If electric trains are cheaper to run then, how come someone who purchases a 'walk-on' ticket for an electric powered train would be charged the same price as a passenger who does the same for a diesel train?

 

[Jordeh]

How come? What would you say the true cost of a journey per passenger is compared to the amount actually charged?

That's very difficult to say. A lot of the prices are due to historical precedent and will have been set decades ago and then just risen by arbitrary percentages since then. Ticket prices don't change when there's new trains on the route for instance - further evidence they do not reflect costs. Unfortunately a lot of it is quite arbitrary, train travel over the exact same distance varies throughout the UK and is cheaper in some parts of the UK than others. It is somewhat determined by what people are prepared to pay too.

Often though it comes down to demand. For instance a train running during rush hour will have similar costs to a train running at 10pm (maybe a few less staff onboard), it will still have similar fuel/electricity consumption, track access charges etc. Yet a train during rush hour is likely to be priced significantly more highly, partly to subsidise the trains which inevitably run at a loss at the start and end of each day.

 

[HarleyDavidson]

Because the price of a ticket is divided down.

http://www.nationalrail.co.uk/times_fares/ticket_types/83871.aspx

Where does the money from my fare go?
On average, 97p in every pound of your fare goes back into the railway1.

The vast majority of revenue from fares covers the costs of services, for example paying for trains, fuel, staff and other day-to-day running costs, and helps to sustain investment in more trains, better stations and faster journeys.

 

[w1bbl3]

Also you have to factor the actual cost per mile difference between electric and diesel is relatively small depending on how it's calculated somewhere between 90p and £1.40 that divided across 600 passengers would be a few pennies difference in ticket cost which is not worth the complexity of trying to introduce and enforce.

 

[JDi]

Also you have to factor the actual cost per mile difference between electric and diesel is relatively small depending on how it's calculated somewhere between 90p and £1.40 that divided across 600 passengers would be a few pennies difference in ticket cost which is not worth the complexity of trying to introduce and enforce.

But then where does the extra money go then? Surely over the millions of journeys that occurs annually all of those pennies add up?

 

[robbeech]

But then where does the extra money go then? Surely over the millions of journeys that occurs annually all of those pennies add up?

Into developing better technology to make newer trains more efficient to minimise price increases, or towards electrification of more track, or as extra profit. All are acceptable as it is a business which is designed to make a profit.

 

[JDi]

Into developing better technology to make newer trains more efficient to minimise price increases, or towards electrification of more track, or as extra profit. All are acceptable as it is a business which is designed to make a profit.

It just seems that passengers who take a journey on an electric train are being given a worse deal than those who take the same route on a diesel train. Presumably the railway makes a profit from both sets of passengers, it just makes more from those who travel on electric trains.

 

[daikilo]

It just seems that passengers who take a journey on an electric train are being given a worse deal than those who take the same route on a diesel train. Presumably the railway makes a profit from both sets of passengers, it just makes more from those who travel on electric trains.

Hi JDi, the deal is to get passengers from A to B. I understand your logic, but it has nothing to do with market economics, in fact it works in reverse. Any normal business like a TOC is trying to maximise profits or in some cases minimise losses if they are anyway loss making. Typically fares will differ either by time or by booking date, but certainly not by energy source.

If the country wanted to encourage passengers to choose a specific energy source then it would be possible, but not with the current TOC structure.

 

[delt1c]

Should a quiet rural branchline be more expensive than a busy urban service? Therby chasing away passengers and presenting a case for closure. Imagine travelling London to Edinburgh by Virgin Eastcoast, no one would use the HST's and the Electric services would be vastly over crowded.

 

[Y Ddraig Coch]

If electric trains are cheaper to run then, how come someone who purchases a 'walk-on' ticket for an electric powered train would be charged the same price as a passenger who does the same for a diesel train?

Would you get in an electric taxi or hybrid taxi and ask for discount because fees are based on a diesel? You would be laughed at.

The ticket price is there for all to see, you make the decision if you want to pay it or not, if the operator makes extra cash by being good to the environment good for them. What fuel / energy they use to get you from A 2 B is entirely up to them and mostly common knowledge how they will do it before you leave or purchase a ticket.

 

[JP]

It just seems that passengers who take a journey on an electric train are being given a worse deal than those who take the same route on a diesel train. Presumably the railway makes a profit from both sets of passengers, it just makes more from those who travel on electric trains.

If you're a business you charge what you can. Just because costs may be lower, the price you charge the customer can be completely different.

BA flies the 747 and the 787 between London and New York. The 747 uses about 10,000kg of fuel an hour and the 787 about 5000kg. Even though the 747 has more capacity, it's still more fuel per person. The tickets on the 787 aren't cheaper than the 747. Why would they be? If someone is willing to pay £400, charge them £400.

 

[Hadders]

The type of fuel used to power a train is only a small cost in the price of a ticket. Off the top of my head (i’m sure more can be added):

Cost of building/leasing the train
Cost of maintaining the train
Cost of building and maintaining the railway (rail renewals, Stations,
signalling etc)
Staffing costs (should lower fares be charged for DOO services )
Cost of the infrastructure to sell tickets

The fuel used to power a train is only a small part of the equation.

 

[JDi]

The fuel used to power a train is only a small part of the equation.

I know, however, even it if it just amounted to a couple of pence per journey, that's going to really add up over the millions of journeys taken on dual powered lines annually.

 

[AlterEgo]

It just seems that passengers who take a journey on an electric train are being given a worse deal than those who take the same route on a diesel train. Presumably the railway makes a profit from both sets of passengers, it just makes more from those who travel on electric trains.

Why are they being given a worse deal? It’s not a zero sum game.

 

[Hadders]

I know, however, even it if it just amounted to a couple of pence per journey, that's going to really add up over the millions of journeys taken on dual powered lines annually.

When the ECML was electrified Fares were increased to reflect the improvement in service and the need to pay back the investment.

What would happen if a diesel train substituted for an electric one? Would passengers be charged an excess?

What about if I’d paid for a diesel train but an electric turned up? I’d want a refund.

What about a bi-mode train? How would fares be charged?

Fares are complicated enough already - it’s not going to happen.

 

[lejog]

I know, however, even it if it just amounted to a couple of pence per journey, that's going to really add up over the millions of journeys taken on dual powered lines annually.

Simplistic cost plus pricing that you describe is barely used at all in the modern world of business, try looking at the Wiki's pricing strategy article if you want some idea of the complexities of modern pricing, it lists 26 different strategies.

What about the difference between a Manchester to London Anytime Return of £338, when the Off Peak Return is £83.90? Do you think that a peak train costs four times as much to run as an off-peak?

 

[Bald Rick]

It just seems that passengers who take a journey on an electric train are being given a worse deal than those who take the same route on a diesel train. Presumably the railway makes a profit from both sets of passengers, it just makes more from those who travel on electric trains.

You mean the railway requires less subsidy for an electric train compared to a diesel train.

Fares have absolutely nothing to do with the cost of providing the service.

 

[edwin_m]

If electric trains are cheaper to run then, how come someone who purchases a 'walk-on' ticket for an electric powered train would be charged the same price as a passenger who does the same for a diesel train?

By definition a walk-on ticket is valid for any train on the journey in question (subject to peak time and occasionally operator restrictions). So the price has to be the same however the train is powered.

But then where does the extra money go then? Surely over the millions of journeys that occurs annually all of those pennies add up?

A bid for a franchise considers all sorts of factors including the operating cost of the trains they plan to use, and throws them all into a big spreadsheet to calculate the subsidy or premium payment if their bid is accepted. So a bidder may choose to make their bid more competitive (or make more profit) by choosing to use different trains, and will consider operating costs, maintenance, leasing costs, energy costs, crew training and any revenue impact when making this decision.

However, once the franchise is signed the bidder has very little scope to change the mix of trains they offered in their bid, so their train operating costs are also largely fixed. Given that both trains have to be operated anyway, those costs change by only a tiny amount if a particular passenger chooses to travel on one of the electric trains instead of one of the diesel ones.

 

[Paule23]

Bear in mind when you buy a ticket for an electric train, yes the 'fuel' cost maybe less, but your ticket price will include the cost of the electric infrastructure. Electrifying a line may cost £billions, and this money is recovered through your ticket price (and subsidies).

Think about a new cancer drug. The cost of the ingredients are probably pennies or a few pounds, but the cost to consumers9hospitals may be may thousands of pounds for a course of treatment. This is because the cost of development of the drug, usually several £billion, has to be made back through ticket sales, you do not just pay the marginal cost of the pill, you also pay for the development cost. Similarly on a plane, you re not just paying the marginal cost of the ticket, but add in the cost of the plane as well. Etc. etc.

Could you come up with a pricing mechanism to fairly allocate costs for different train types, over different infrastructre, the is fair AND transparent? Good luck with that.

 

[yorkie]

If electric trains are cheaper to run then, how come someone who purchases a 'walk-on' ticket for an electric powered train would be charged the same price as a passenger who does the same for a diesel train?

You misunderstand. We use market-based pricing.

It just seems that passengers who take a journey on an electric train are being given a worse deal than those who take the same route on a diesel train. Presumably the railway makes a profit from both sets of passengers, it just makes more from those who travel on electric trains.

You misunderstand. The rail industry is subsidised; the Government want fares to be at a level that is as high as they can get away with.

In any case fuel is only 4% of costs.

 

[DarloRich]

I am not sure the OP really understands his own question.

 

[6Gman]

If electric trains are cheaper to run then, how come someone who purchases a 'walk-on' ticket for an electric powered train would be charged the same price as a passenger who does the same for a diesel train?

Because power is only a part of the overall cost and the fare is based on the overall cost of providing the service, not the fuel cost of a specific departure.

 

[6Gman]

I know, however, even it if it just amounted to a couple of pence per journey, that's going to really add up over the millions of journeys taken on dual powered lines annually.

Which will be reflected in the franchise subsidy/premium.

 

[delt1c]

Therfore if an electric fails and has to be rescued by a diesel thunderbird should the train manager walk through the train charging the customers extra for the aditional fuel of the rescue loco.

 

[LNW-GW Joint]

When the ECML was electrified Fares were increased to reflect the improvement in service and the need to pay back the investment.

That principle was started with the WCML electrification, and applied to other lines as they were modernised (eg GWML HSTs).
It's the main reason fares are so high on these routes.
The last explicit case was when South Eastern started running on HS1 - fares were allowed to escalate annually at RPI+3% rather than the typical RPI+1%.
I'd expect to see the same principle applied to IEP routes, and HS2 (when it comes). Maybe also with GA and other areas with massive renewal of stock.
The investment has to be recovered somehow.

Contrariwise, slower routes with older stock (eg Regional Railways routes) stayed "cheap", and you can see the anomalies across the network.
But there are still major discrepancies even within these principles, with some "fast" journeys having cheaper fares and "slow" journeys more expensive than you would expect.
PTE and local government fares also distort things locally.

Example:
Cardiff-Swansea (47 miles) - Off Peak Return (8A) £15.40. (there are cheaper day tickets)
Chester-Llandudno (47 miles) - Off Peak Return (8A) £21.70 (there are no cheaper tickets)
Both these routes have had the same operator for 15 years (ATW).
And yet Chester-Llandudno is the regional route with little investment, but has much higher fares.