The 'Ten Pence Price War' & TOC-specific tickets

Discussion in 'Fares Advice & Policy' started by Starmill, 9 Sep 2019.

  1. Starmill

    Starmill Events Co-ordinator

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    I have created this thread to promote discussion on the following hypothesis:

    To given an illustrative example we can look at the new fares round tickets between Leeds and York, large cities in Northern England between which trains run frequently and to an unusually competitive schedule with the journey time by road. There are 4 hourly fast TransPennine Express trains, 2 Northern trains one fast and one stopping (services via Harrogate can be ignored for the purposes of this analysis), and one fast CrossCountry train.

    Current fares are high on a pence per mile basis and set by TransPennine Express. Tickets for use on any train:

    Single after 0930 weekdays £15.60
    Single at any time £15.80
    Same day return after 0930 weekdays £15.70
    Same day return at any time £18.70
    Return within one month after 0845 weekdays £19.20
    Return within one month at any time £25

    In competition with this, Northern set up their own 'dedicated' fares. These currently stand at the following levels:

    Single after 0930 weekdays £12.10
    Single at any time £13.70
    Same day return after 0930 weekdays £12.20
    Same day return at any time £15.50

    But now, TransPennine Express have introduced their own 'dedicated' fares. For regulatory reasons it is likely that these are temporary, but there will still be a huge number of people travelling at the times when they are available:

    Single after 0930 weekdays £12.00
    Single at any time £13.60
    Same day return after 0930 weekdays £12.10
    Same day return at any time £15.40
    Return within one month after 0845 weekdays £18.20
    Return within one month at any time £22.00

    These have obviously been added in a tit-for-tat fashion so that they are 10p cheaper than the Northern Only tickets. This has also created the counter-intuitive situation where the cheaper tickets are for the faster and more frequent trains.

    One the customer has bought the ticket, under rail industry rules, they cannot change their mind without penalty. If they accidentally board the wrong train the penalty is even higher - the price of a new full price ticket which is likely to be both more expensive than the one the customer needs and result in them having paid twice for the same journey. In some cases the customer may be liable for a Penalty Fare (minimum £20) increasing the amount they have paid even further.

    In some cases, there are huge benefits to these types of ticket being offered. Between Manchester and London, some passengers are now able to benefit from tickets costing 60% less than the cheapest flexible ticket that was previously available. This gives customers genuine choice, competes with driving and long-distance bus services, and promotes the railway industry across the board. But this is the opposite of what is happening between Leeds and York.

    Leeds to York isn't an isolated example of this kind of fare setting. For example Telford to Wellington (a 5 minute hop) and Warrington to Manchester are both 30p cheaper if you restrict yourself to the one Transport for Wales service per hour.

    In addition to this, in the past 3 years, first Northern, then TransPennine Express and then CrossCountry introduced Advance tickets for this short journey. These come with some of the same disadvantages, but not all. Importantly, however, they already provided a mechanism to sell customers cheaper tickets dedicated to one train company close to departure time. But despite this the companies have continued to pursue new products which take significant rights away from customers without them really knowing it, and in some cases without them really explaining it, in exchange for barely any financial return. Setting tickets to 10p less than the current cheapest is a cynical policy designed to capture the parts of the market that just opt for the cheapest ticket or the first one to appear, without trying to offer customers the best value for money that they can.

    To summarise my arguments:
    • While there are clear benefits to the consumer from allowing this kind of market segmentation where significant savings are available over the existing ticket prices, this is increasingly not happening, and the price differences are increasingly just £0.10
    • It seems increasingly likely that some (though certainly not all) setting of dedicated tickets is intended not to grow the market for rail travel but rather to move passengers from one TOC to another, causing inefficiency and undermining the model of competition for the franchise, and even long-term fares revenue maximisation
    • The industry is not doing enough to give consumers clear information about their ticket restrictions before they pay
    • Although against the Code of Practice, customers rights are often not respected when there is disruption to train services and they do suffer discrimination on the basis of operator
    • The more dedicated tickets are set, the more likely it is that the customer will not hold the correct ticket for their journey. The more instances where this happens, the more the train companies can get away with charging people twice for one journey
    Although I do not know what the answer to this is, I'm inclined to believe that the answer lies in stronger application of government regulation, and better consumer rights in law for railway passengers. Conversely, those using 'split-ticketing' websites benefit significantly from these cheaper tickets, as do experts in fares. What do you think?
     
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  3. BigCj34

    BigCj34 Member

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    Have a minimum price difference between walk up fares or even ban TOC specific walk up fares. Would it be easier to set walk up fares restrictions by route taken rather than by TOC used? At least with advances passengers know they have to get a train at a set time.
     
  4. yorkie

    yorkie Administrator Staff Member Administrator

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    If a way can be found to achieve this, I agree this would be sensible.

    The Northern Only fares on this route are relatively sensibly priced. What is arguably vexatious is TPE introducing their own temporary dedicated fares (they are not allowed to introduce permanent dedicated fares as they 'own' the flow) at marginally less than Northern's prices. It effectively means almost no-one is going to buy the Northern Only fares for the duration of the temporary TPE fares. TPE will quite possibly be hoping that Northern delete these fares. I hope Northern do not do that.
    I think this would be a bad thing for passengers; it would result in large fare rises for many people.
    In the example given, this is the same route (the only difference in this area is that Northern also run via Harrogate)
    But that doesn't make them better, and there can be multiple departures at the same time anyway.
     
  5. mikeg

    mikeg Member

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    Of course the real big win would be if TPE just accepted they'd lost and lowered the 'any permitted' fares. Though I believe except Cardiff to Swansea many years ago this never happens, they instead hope their competitor will delete fares and things can go back to being expensive again.

    Incidentally, why would Northern delete fares? Is there a cost to having fares in the system?
     
  6. Starmill

    Starmill Events Co-ordinator

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    I think it more likely they'll drop them so they're 10p cheaper again, if they notice and if they have the administration resources to do so.

    This has been happening for years between Milton Keynes and London between the two large operators. Ultimately, the passenger loses because if they make an error they can be penalised for it, unlike the TOC. Where there are two closely matched TOC specific fares all it really does is show that they're at about the sustainable level, and the inter-available fare is ludicrously overpriced.
     
  7. Merseysider

    Merseysider Established Member Fares Advisor

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    Unfortunately their trains at the moment - when they do actually turn up - don't have the capacity this would require.
    Agreed. A similar situation was seen between York and Newcastle not too long ago.
     
  8. Haywain

    Haywain Established Member

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    As things stand, TPE will probably receive something in the region of 60% of each 'Any Permitted' fare sold, with Northern making around 25 - 30% (after retailer's commission). So Northern do well out of their dedicated fare while TPE would suffer in comparison for reducing the flexible fare. Thus there is little incentive for TPE to make a downward adjustment.
     
  9. Solent&Wessex

    Solent&Wessex Established Member

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    And even if they did, Northern would just offer a lower priced Northern Only fare, as it would still be in their financial interests to do so.
     
  10. Starmill

    Starmill Events Co-ordinator

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    I would imagine it depends on the proportion of the ticket sales that have switched from the existing fares to the Northern Only ones. The introduction of this fare suggests to me that more people than they would have liked switched.
    They might still do this anyway. I'll look out for them lowering their fare by £0.20.
     
  11. Haywain

    Haywain Established Member

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    I believe that something similar will have happened with LNER in the north east price war a couple of years back, but I don't remember the 'Any Permitted' fares going down. TPE are more likely to fight back with more Advance fares.
     
  12. Starmill

    Starmill Events Co-ordinator

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    Oh yes, I think you're right.

    Although interestingly TPE did effect a very small reduction in the price for Manchester to Leeds day returns by re-introducing the CDR after they deleted it last year. On this flow Northern were indeed offering a cheaper day return. They haven't introduced day returns again between Manchester and Huddersfield which does imply that people buying Northern Only tickets was a driver.
     
  13. Baxenden Bank

    Baxenden Bank Established Member

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    I don't agree that the passenger loses out.

    I don't agree that any TOC necessarily loses out.

    The thrust of your argument seems to be: "that if fares can be made cheaper, then that should come without further restrictions". Fair (or fare) enough. Politically I do not disagree and can maintain an ideological argument that train travel should be funded through general taxation. Free at the point of use, like the police or the NHS!

    To the passenger, any 'cheaper than fully flexible / Anytime' fare has advantages and disadvantages. In your example the 'any operator' day / month return places restrictions on the passenger (no travel before 0930 / 0845 respectively). Passengers seem, generally, capable of understanding this and buy accordingly. Introduction of 'operator specific' fares adds an additional decision level to the ticket buying process and places further restrictions on the passenger. So long as the restrictions are made clear prior to purchase* I see no reason to prevent cheaper and cheaper fares being introduced with greater and greater restrictions - with the proviso that the current, price-regulated, any operator fare should be kept.

    To some, cost is the over-riding factor. To others cost is a lesser consideration to flexibility.
    The dis-organised passenger who catches the wrong TOC train is penalised by having a ticket specific to a different TOC. That is the outcome you accept when you go for the cheaper option. Just as an Advance stops you coming home on an earlier train if your meeting, or the cricket, finishes early. You get what you pay for.
    The disrupted passenger is penalised, again just like with an Advance, because you have to wait for the next service by the TOC with whom your ticket is valid. Again, that is the outcome you accept to save some money.

    The passenger needs to decide, having been clearly informed of the options, shall I pay £25 to come back with any operator and in up to one months time, or shall I pay as little as £12.10 with some restrictions placed on my options. The 10p difference between the lowest fares then comes down to choice. Personally it makes the decision more difficult.
    For an off-peak day trip:
    Option A: Any operator £15.70, operator specific at £12.10 / £12.20 is an attractive saving. That's a pint and a packet of crisps saved!
    Option B: Any operator £15.70, Northern £12.20 or TPE £12.10 is more complex. Am I that bothered about that 10p? Who offers the better service? A saving/extra cost of 10p determined by my feelings on frequency, length of journey, comfort, on-board facilities, reliability and reputation.

    *Retailers / websites / TVM could present the information in a better way rather than offering the restrictions after you have selected the ticket. As examples, br.fares lists every fare available in price order, the old Webtis booking engines showed all fares, even if not available at a specific enquired time.

    What are the respective journey times and costs (to travellers) by competing modes, which will include car, bus and coach? If the rail fares have been reduced to below that of competing modes, it should grow the market, or at least result in modal shift. Thus all three TOCs may benefit, even Cross-Country without a discounted fare. People try the cheaper product, like it, then upgrade to the higher price fare offering flexibility next time out.

    That's how the free market works. A high street discounter offers a branded product cheaper than a big-four supermarket. The supermarket can sit there and take a small loss if only a few customers start buying elsewhere, or they can drop the price (which they could probably have offered all along) to retain customers.
    Why would the slower service automatically be seen as the one with cheaper fares? Slower may be less attractive but is it cheaper to operate? The faster train takes less time to do a round trip, so you can achieve more trips per day for the same outlay (staff being paid much the same across TOCs and regardless of speed). A 25 minute end-to-end journey requires 1 unit for an hourly service. A 40 minute end-to-end journey requires 1.5 units. More leasing costs, more drivers, more guards, higher ticket prices!

    Should the fare-setter be prevented from offering cheaper permanent 'own operator' fares? No, providing a 'price-regulated' any-operator fare with reasonable flexibility remains and is clearly publicised.

    Was 'moderation of competition' on the West Coast a good thing for the passenger? Or was it MofC that allowed Virgin to price-gouge before London Midland came along?

    Should fare-setting be taken out of the hands of specific TOC's and given to an industry-wide body, an independent body, or the Dft (OMG NO)?
     
  14. Starmill

    Starmill Events Co-ordinator

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    I think everything from the above post has been dealt with already in my opening post. But I will offer this one important view that I implied but didn't add explicity:
    The railway doesn't operate in a free market. Not even close.
     
  15. Starmill

    Starmill Events Co-ordinator

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    I will also add that nearly everyone in the whole country, including the majority of people in this country (those who travel by rail never or infrequently) would be easily capable of understanding:
    - Valid on the 0910 train only
    - Valid on trains leaving after 0929 only

    What they do not understand, because most of those people will have no comprehension of, is abbreviations, codes and unexplained words like 'TPE Only'. Enthusiasts and railway staff, in my experience, seem to struggle with the concept that typical passenters do not remember the names of train companies. To put it plainly, they don't. Let alone manage to work out what that means when it comes to identifying an individual train. They also won't be told that a ticket is actually valid on every train in most cases, they will simply be shown a range of:
    'Northern Only'
    'TPE Only'
    '.'
     
    Last edited: 10 Sep 2019
  16. Failed Unit

    Failed Unit Established Member

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    The one I don’t understand is GTR. Where you pay a different price depending on what kind of train you want to sit on. I am surprised some of those fare haven’t gone as they are just different subsidies competing against themselves. In particular the mega cheap “Thameslink” fares.
     
  17. Starmill

    Starmill Events Co-ordinator

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    One thing I have noticed is that TPE have desperately shoe-horned in TPE Only fares almost everywhere they are entitled to. From the longest of journeys, such as Cleethorpes to Glasgow, to the shortest of journeys such as Mirfield to Deighton or Stockport to Manchester, and everything in between such as Manchester to Sheffield and Selby to Hull. Middlesbrough to Thornaby has, for the moment, escaped! I wonder if Redcar Central to Middlesbrough will gain them in December :lol:
     
  18. Baxenden Bank

    Baxenden Bank Established Member

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    Supermarkets don't operate in a free market either. Every business is subject to some form of moderation of competition. For example a business cannot offer suicidally low loss-leaders to drive a competitor out of business. Could a TOC do so, within it's franchise period, providing it's owner was prepared to bear the cost? What is to stop TPE (as the example) offering 10p tickets rather merely than 10p cheaper tickets? Which I understand Northern were doing recently for specific reasons. What is to stop a fare-setter TOC from reducing the regulated fare, on specific flows, to a very low-level to impact more heavily on a competitor. For example, Cross Country set many fares on the West Coast (Stoke to Manchester for example) yet provide 2/5ths of the service.
     
  19. Starmill

    Starmill Events Co-ordinator

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    Supermarkets are totally and utterly non-comparable and it's a disappointment that I even need to point that out. Not only is it fairly easy to see why but that specific thing is actually brought up on here very frequently.

    Supermarkets only have a very few rules to follow, about whom they employ and how, the correct way to dispose of waste, the very minor protections from monopolies and other anti-competitive practices that consumers theoretically have. The obligation to pay their taxes (sort of). And so on. Railway companies operate in a totally different way and are required to sign up to a whole raft of rules set by the government on every little detail of their operation. Considering how supermarkets set their prices is basically irrelevant.

    Analogies rarely work.
     
  20. Baxenden Bank

    Baxenden Bank Established Member

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    But your OP is all about price setting.
    TOC A sets the fare, TOC B introduces a lower price, TOC A retaliates.
    Sounds like free-market competition to me.
    A race to the bottom until either one goes out of business, or one/both/all see sense and start back-pedalling, with or without a behind the scenes agreement to no longer compete quite so aggressively or at all.
     
  21. Starmill

    Starmill Events Co-ordinator

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    Indeed. And if you actually read the OP you'll see why I was commenting on this market specifically, and why general rules don't apply.
     
  22. Arctic Troll

    Arctic Troll Established Member

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    I see they've also launched two new TPE Only rail rovers in the north east, which is an interesting move to say the least.

    I see this as a positive, showing that competition is working. Each company wkll reduce by 10p until it is no longer worth their while. We saw a similar thing on Newcastle-York, which had a positive effect on reducing the horrific price-gouging from Stagecoach.

    Stagecoach absolutely rinsing passengers on the WCML shows what happens when moderation of competition goes too far the other way.

    Maybe allowing the fare setting TOC to also issue TOC specific walk up tickets- as happens at Milton Keynes- could help by stopping the other TOC issuing fares mere pence cheaper than any permitted?

    Certainly changing PF rules so having a ticket for the wrong TOC being treated the same as having an off-peak ticket in the peak would help.
     
  23. Haywain

    Haywain Established Member

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    Penalty Fares are an irrelevance here - in none of the cases under discussion are all of the operators PF issuing TOCs so the chances of receiving a PF are actually rather small.
     
  24. Arctic Troll

    Arctic Troll Established Member

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    Northern are?
     
  25. Haywain

    Haywain Established Member

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    Yes, but TPE are not, nor XC or LNER (relevant to the north east flows). My post did not say that none of them are PF TOCs.
     
  26. maniacmartin

    maniacmartin Established Member Senior Fares Advisor

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    Having a TOC only fare that is only 10p lower is not competing on price, as the prices are almost identical. With the exception of singles for immediate travel, I suspect that very few people would sacrifice flexibility for the sake of 10p if they understood the fares properly.

    The real reason these fares are priced as such is so they become the top/recommended fare in journey planners, so that those who understand the system less than us enthusiasts will just click it thinking that it is the best deal.
     
  27. Haywain

    Haywain Established Member

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    In the cases highlighted in this thread the 10p differential is between different TOC only fares, with a bigger differential from the flexible fare.
     
  28. robbeech

    robbeech Established Member

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    The cynic in me thinks that Northern will likely be ok with this.
    Most people (and I really do mean most) won’t have a clue what ticket they’re buying between Leeds and York. They’ll look for the cheapest one and follow an itinerary they’re given. The problem comes when they’ve been used to the cheap £12 ish tickets being Northern only. They might buy one, the machine might not be too clear in saying it’s TPE only, the ticket office at Leeds likely won’t tell you the restriction (and people who are used to just asking for the cheapest will be used to that being the Northern one) and there’s a good chance that ticket office staff at Leeds won’t even know about the new tickets. This will lead to people buying the cheapest ticket, getting on the Northern train, and having to buy a new ticket. So I’ll end the post by repeating the first line and saying that I don’t think Northern will be that bothered by this.
     
  29. Bletchleyite

    Bletchleyite Veteran Member

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    This issue exists at MKC, really they should simply reduce the interavailable fare and bin off the TOC specific fares; they are pointless.

    This rather differs from other longer distance flows where LNR and VT compete, with LNR offering a budget, slower option and VT a premium, faster option - this is genuine market segmentation (which probably widens appeal and so grows the market) and provided LNR can provide the required capacity probably is of benefit.
     
  30. Hadders

    Hadders Established Member

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    They won’t bin off the TOC only fares as it’s a way for them to gain more income than an Any Permitted ticket whose revenue has to be shared between many operators.
     

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