Could GB railways return to profit?

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158801

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In the last year the U.K. government has spent £7.7 billion supporting the Rail network because of the pandemic.

In the third quarter of the 20-21 financial year 140 million journeys were made. This compares to the 463 million journeys that were made in the same quarter a year earlier.


Now, what I’ve done is multiplied the above passenger figures by 4 to get a rough annual figure -
560 million journeys currently compared to 1.85 billion before the pandemic.

Maybe this is a rather simplistic point of view but..

£7.7 billion divided by 560 million (approx current annual useage) is 13.75.

So, if the average ticket prices is £13.75 the railway could break even with fewer passengers.

With previous passenger useage the average ticket price needed to be only £4.20.

Are these figures achievable ?

One could argue that, without privatisation/ franchises etc, £4.20 in previous years could easily be maintained by a nationalised industry.
 
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O L Leigh

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Correct me if I'm wrong, but that figure only accounts for the support given by Government to the TOCs during the pandemic and does not include infrastructure, rolling stock and any other costs normally associated with running the rail network. Therefore the drive towards profitability has a very long way to go.
 

zwk500

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Running the railway cost more than £20bn in 2019. Passenger revenue covered a little more than half that, other non-governmental income covered a further £2bn.

In order to achieve profitability with 0 subsidy the industry would either have to half costs, double fares or find the balance in between.
 

Roast Veg

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Let me rephrase the question - should the railways strive to make a profit on the DfT's books alone, or should we take the wider benefits into account? If we compare the railways to the NHS, we don't look at profitability in money-in money-out terms, but as a public service with wide reaching social and economic benefits. These aren't impossible to quantify, and you could "balance the books" this way instead.

But should you even do that? There are a whole host of branch lines and little used services and stations that wouldn't even turn a "profit" on the broadest of metrics. Most of Northern Rail, ScotRail, and Transport for Wales, as well as smaller patches of nearly every other operator would have to close and the lines would have to be mothballed. Is that anything anybody wants to see? What's the "value" of something irreplacable?

My answer to the question is "It probably could, but it definitely shouldn't".
 

Chris Butler

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So, if the average ticket prices is £13.75 the railway could break even with fewer passengers.

Shouldn't that sentence be: "So, if the average ticket price were £13.75 higher than it currently is the railway could break even with fewer passengers provided none of them were put off by the increase.".

By the way, I think that, very, very roughly, that would be a doubling of fares.
 

HSTEd

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If we are interested in the "best value for society" railway, it appears likely that we should attempt to drive volume however possible. Rail is, after all, a bulk transport system.

It is worth noting that well over 10% of rail journeys in the old world were made on London Overground, and they have rebounded faster than the whole.
I may be wildly wide of the mark, but I doubt London Overground consumed 10% of the railway's operational resources to achieve this.

Merseyrails performance is not as good but still better than the overall railway.
 

Bald Rick

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Let me rephrase the question - should the railways strive to make a profit on the DfT's books alone, or should we take the wider benefits into account? If we compare the railways to the NHS, we don't look at profitability in money-in money-out terms, but as a public service with wide reaching social and economic benefits. These aren't impossible to quantify, and you could "balance the books" this way instead.

But should you even do that? There are a whole host of branch lines and little used services and stations that wouldn't even turn a "profit" on the broadest of metrics. Most of Northern Rail, ScotRail, and Transport for Wales, as well as smaller patches of nearly every other operator would have to close and the lines would have to be mothballed. Is that anything anybody wants to see? What's the "value" of something irreplacable?

My answer to the question is "It probably could, but it definitely shouldn't".

The ‘railway’ hasn’t been required to make a profit at system level for a long time, and wider social economic benefits are taken into account in all manner of investment decisions and service provision decisions. Very little of the railway makes a profit at system level. I don’t see any of this changing.

What is required is for the railway to endeavour to reduce its call on the taxpayer as far as is practical and reasonable.


I may be wildly wide of the mark, but I doubt London Overground consumed 10% of the railway's operational resources to achieve this.

No, but then neither does it generate 10% of the railways income. Far from it - using 2019 data it generates the lowest income per passenger journey of any TOC, and thus provides only 2% of farebox.
 

HSTEd

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No, but then neither does it generate 10% of the railways income. Far from it - using 2019 data it generates the lowest income per passenger journey of any TOC, and thus provides only 2% of farebox.

Despite this, it still managed to achieve lower net government support in 2018-19 than the GB average! (6.1p per passenger-km vs 6.4p)

TfL rail managed 3.2p somehow!
 

LNW-GW Joint

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The DfT support figure of £7.7 billion does not cover big chunks of the network:
- Scotrail and TfW (devolved)
- Merseyrail (local concession)
- London Overground, TfL Rail, Crossrail (TfL concessions)
- LNER and Northern - OLR operated and directly funded by DfT

Q3 2020-21 was also the best quarter since Covid started, the usage figures for Q4 will be worse because of the strict lockdown, as they were for Q1.
And that is only the TOCs, there's a big sum supporting Network Rail too, and central functions like ORR.
 

ABB125

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Agreed. Although of course, you could break even with just 1 passenger providing it was the right fare (that passenger being a certain Mr Gates or Mr Bezos, admittedly :D).
Plus the running costs would be lower, as with only one passenger, you'd only ever need to run one train at a time!
 

Ken H

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Its too early to say what the long term effect COVID will have on travel. So its difficult to suggest how the railway could reduce subsidy. Once the 'new normal' shows what its like then we can start thinking. If commuting declines, then a lot of stuff that is only there for the rush hours becomes unnecessary. So leading to cost reductions. I also dont know if high street retail will recover or will Amazon win the retail war.
 

Bald Rick

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So its difficult to suggest how the railway could reduce subsidy.

It’s not difficult at all. It’s to run fewer services, and have fewer people running the railway (potentially earning less money).

What is difficult is to suggest where.
 

A0wen

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Its too early to say what the long term effect COVID will have on travel. So its difficult to suggest how the railway could reduce subsidy. Once the 'new normal' shows what its like then we can start thinking. If commuting declines, then a lot of stuff that is only there for the rush hours becomes unnecessary. So leading to cost reductions. I also dont know if high street retail will recover or will Amazon win the retail war.

BIB - if you mean a return to the high street of 10 years ago, then forget it. That ship has well and truly sailed.

Avaricious local authorities have killed the high street which deterred the big retailers from investing and customers from going there.

The bit that is interesting is of the surviving elements of the high street, such as coffee shops, sandwich bars etc, how many of them are reliant on the return of commuters - for example many of those kind of places in London which grew up in the vicinity of a couple of office blocks may start to struggle if people don't return to the office or return to the office 50% of the time. Which is the same challenge the rail network is going to face.
 

O L Leigh

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What is required is for the railway to endeavour to reduce its call on the taxpayer as far as is practical and reasonable.

...or to take a slightly more Continental view of the railway.

In the UK we labour under some fairly unhelpful language when it comes to the railways. There is no pressure on the road network to be profitable (or just break even) in quite the same way as there is for the railways. Roads get "investment" while the railway get "subsidised". There is a risk that you get a spiral towards the bottom as the burden of funding shifts more towards the passenger, as inevitably fares will need to go up. Provided that the necessary fare increases remain balanced with taxpayer funding all should be well, but if not there is a risk that passengers get priced off trains.
 

Ken H

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It’s not difficult at all. It’s to run fewer services, and have fewer people running the railway (potentially earning less money).

What is difficult is to suggest where.
but we dont really know where is sensible till it settles down post COVID.
 

quantinghome

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Very few passenger railways make a true profit anywhere in the world. Japan is the exception (and even that's debated) due to extremely high population density.

Freight railways are generally profitable - see the US rail network.

The history of british railways from the 1950s to 1980s can be summarised as a search for a profitable core to the passenger railway, eventually concluding that there might be one, but it would be small and not very profitable.

But then what modes of transport actually make a profit?
 

Grumpy Git

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...or to take a slightly more Continental view of the railway.

In the UK we labour under some fairly unhelpful language when it comes to the railways. There is no pressure on the road network to be profitable (or just break even) in quite the same way as there is for the railways. Roads get "investment" while the railway get "subsidised". There is a risk that you get a spiral towards the bottom as the burden of funding shifts more towards the passenger, as inevitably fares will need to go up. Provided that the necessary fare increases remain balanced with taxpayer funding all should be well, but if not there is a risk that passengers get priced off trains.

Hence why no one in government has the "balls" to replace vehicle excise duty (i.e. road tax), with an extra duty on fuel, so those who use the roads most pay the most, just like with rail.

I don't know what the road tax rate is on HGV's, but if you consider the "load" exerted on a given road surface is the cube of the axle weight, it's probaly not enough?
 

Sm5

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How to minimise the loss might be a better way to put it.
I think post covid, the railway network may need reshaping a little.

Part of the pre-covid problem was trains such as Thameslink needed to be packed nose to nose, end to end in rush hour in order to be viable outside the peak. Post covid, a good chunk of that travel has probably gone. Another chunk may vary travel patterns to outside peaks and alternate days...

as a thought,
12 coach commuters running all day, but empty / infrequently at some hours may not be the long term solution. It might be the 4 coach commuter, running all day is what may be more appropriate.
 

ABB125

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How to minimise the loss might be a better way to put it.
I think post covid, the railway network may need reshaping a little.

Part of the pre-covid problem was trains such as Thameslink needed to be packed nose to nose, end to end in rush hour in order to be viable outside the peak. Post covid, a good chunk of that travel has probably gone. Another chunk may vary travel patterns to outside peaks and alternate days...

as a thought,
12 coach commuters running all day, but empty / infrequently at some hours may not be the long term solution. It might be the 4 coach commuter, running all day is whats more apprpriate.
If only Thameslink used 4-coach trains which could be joined together/split apart as required... :D:D
 

Randomer

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I'm not sure any passenger railway globally makes an operating profit on a national level?

Certainly some organisations operating a specific route or group of services in some countries make a profit but on a national scale when you balance the costs I can't find an example. The Japanese figures I've looked at previously seem to lump in the profits the various Japanese railway companies make from the well organised use of real estate and concessions near stations that they do very well.

Historically the railway system was fairly ambivalent towards passenger use when first established in the UK. The routes aimed at profitable freight primarily with passengers a secondary concern, similar in many ways to how the US system still operates today. Even then huge numbers of railway companies failed or were absorbed by competitors in the early days thru to grouping. If the railways have realistically not made a profit on passenger traffic for at least 60 years why would they do so now?

I'd echo what others have said, to some degree all public transport options (roads included) is a balance of societal need vs. cost to society as a whole thru subsidy or different tax rates. Why should the railways be cost neutral when road and other modes are not?
 

Bald Rick

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Roads get "investment" while the railway get "subsidised".

To be fair, UK Government has been using the word ‘investment’ for any type of capital expenditure on the railways for a long time. And if pushed uses the word ‘support’ for operational spend. ‘Subsidy’ is rarely used.



but we dont really know where is sensible till it settles down post COVID.

Exactly, which is what I said!
 

Annetts key

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The mainland U.K. railway could make a profit if we close about 90% of lines to passengers and make a very large number of staff redundant. Oh, and all the debt gets transferred from the railway to the government.

But that would be politically unacceptable... so it’s not going to happen in our lifetimes.
 

dctraindriver

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It’s not difficult at all. It’s to run fewer services, and have fewer people running the railway (potentially earning less money).

What is difficult is to suggest where.
Not the first time you've mentioned earning less money. Do you think pay cuts are on the agenda?
 

Annetts key

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I'm pretty sure they did, in the "Golden Era" and before then (ie: before 1930).
Even before the 1930s, they did not make very much money. Either having debts to service or by using the money they did have to expand their networks or to buy up other companies.

And many of them almost went bust during their construction phase. The only real reason we ended up with such a big network was all the investors jumping on the new technology band wagon...
 

158801

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Does anyone know what the current average ticket cost is?

Earlier, someone suggested about £7?
 
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