Four bidders for Elizabeth line operations from May 2025 announced

[AJDesiro]

This is probably a really stupid question, but here goes...if TfL keep all the revenue generated by ticket sales, how does the operator make their money?

Presumably a fixed management fee, a la national rail contracts?

 

[LNW-GW Joint]

This is probably a really stupid question, but here goes...if TfL keep all the revenue generated by ticket sales, how does the operator make their money?

They get their costs paid by TfL, plus a management fee on top for running the show.
That's how the "big railway" works as well, post-Covid (with DfT being the bankers).

 

[The Snap]

Presumably a fixed management fee, a la national rail contracts?

They get their costs paid by TfL, plus a management fee on top for running the show.
That's how the "big railway" works as well, post-Covid (with DfT being the bankers).

Ok thanks. So on top of their management fee, which is presumably a fixed % of ticket sales or a fixed amount of money, what other opportunities do they have to make profit?
It seems a little uninspiring, to me anyway, for a company to want to run a railway franchise if all they can make is a fixed fee per year.
There must be more to it though otherwise companies wouldn’t be interested would they!

If it’s a fixed % based on ticket sales, for example, presumably the incentive is to sell as many tickets as possible…

 

[LNW-GW Joint]

They have control over their costs (train operation, mainly), so that's where the management attention will go.
There will be performance bonuses as well, not an easy ride with so many disruptions on the none-core sections of route.

 

[SynthD]

Ok thanks. So on top of their management fee, which is presumably a fixed % of ticket sales or a fixed amount of money, what other opportunities do they have to make profit?
It seems a little uninspiring, to me anyway, for a company to want to run a railway franchise if all they can make is a fixed fee per year.
There must be more to it though otherwise companies wouldn’t be interested would they!

If it’s a fixed % based on ticket sales, for example, presumably the incentive is to sell as many tickets as possible…

Yes, it's mostly about making an attractive service. There are bonuses that can be* twice the size of the management fee, for tickets sold, customer satisfaction, running on time.

*I heard this for mainline concessions with the DfT, does it apply to concessions with TfL?

 

[stuu]

Ok thanks. So on top of their management fee, which is presumably a fixed % of ticket sales or a fixed amount of money, what other opportunities do they have to make profit?
It seems a little uninspiring, to me anyway, for a company to want to run a railway franchise if all they can make is a fixed fee per year.
There must be more to it though otherwise companies wouldn’t be interested would they!

It's an almost-certain profit, which is not the case for a lot of industries

 

[Trainbike46]

Ok thanks. So on top of their management fee, which is presumably a fixed % of ticket sales or a fixed amount of money, what other opportunities do they have to make profit?
It seems a little uninspiring, to me anyway, for a company to want to run a railway franchise if all they can make is a fixed fee per year.
There must be more to it though otherwise companies wouldn’t be interested would they!

If it’s a fixed % based on ticket sales, for example, presumably the incentive is to sell as many tickets as possible…

In most cases there will be various bonuses for good performance (and penalties for bad performance).

Generally it is important to remember that the "customer" for these contracts is TfL, not the passenger (who is instead a "customer" for TfL)

Personally, I think it may well be better to do this in-house, but the TfL contracts have tended to lead to good service, except where there are outside circumstances that prevented that.

 

[Horizon22]

Ok thanks. So on top of their management fee, which is presumably a fixed % of ticket sales or a fixed amount of money, what other opportunities do they have to make profit?
It seems a little uninspiring, to me anyway, for a company to want to run a railway franchise if all they can make is a fixed fee per year.
There must be more to it though otherwise companies wouldn’t be interested would they!

If it’s a fixed % based on ticket sales, for example, presumably the incentive is to sell as many tickets as possible…

It isn't super attractive, but the management fee % can still be reasonable as a sort of 'guaranteed profit'. MTR for instance have to pay for a % for all delays, even if they/TfL are not at fault.

 

[Thirteen]

The concession contracts generally work well for TfL but the disadvantage is that is there is problems, TfL tends to get the blame and not the operator because to the public sees just TfL.

I would be argue that the concession model is more lucrative than running a TOC because things like rolling stock are paid for by TfL so the operator only has to worry about is performance and staffing costs.

 

[Horizon22]

The concession contracts generally work well for TfL but the disadvantage is that is there is problems, TfL tends to get the blame and not the operator because to the public sees just TfL.

However is that really that big a difference between say Southeastern or LNER getting the blame for a Network Rail infrastructure issue? The train company has to cancel the trains and whilst there is some awareness of Network Rail (and their public presence is getting better) the public doesn't often make that distinction and blame the operator.