What happens to Fare Income at Franchise Change?

[Belperpete]

If Virgin sell a ticket now for travel after the franchise change, who gets the money? I suppose the same applies to any TOC that sells a ticket now for travel on the West Coast after the franchise change. I know that the money from a ticket sale gets divvied up according to what operators you can travel on with that ticket, but is it dependent on what TOCs are operating the services at the time the ticket is sold, or at the times the ticket is valid?

If it depends on date of sale, then presumably it is in Virgin's interests to sell as many post-change tickets as possible, as they would get to keep the money without incurring the costs of running the trains. Season tickets would be particularly lucrative. And the new TOC would just have to accept that they would start off running trains for which they wouldn't get a large slice of the income.

Or if it depends on date of validity, what would happen about tickets that could be used both before and after the change. Such as the outward portion of anytime tickets, the return portion of anytime and off-peak tickets, or seasons.

 

[Tetchytyke]

DfT now put a restriction in the franchise agreement that states a franchisee can't sell tickets more cheaply after the end of the franchise than they were selling them 13 months before the end. You'll see an example of it in the ICEC model contract from 2014. There are bonds for season ticket income which get passed on, I believe.

This happened after NXEC had a massive "seat sale" as they handed the keys back. Getting £9 tickets on a peak train into London was hilarious as a passenger, of course, but was pretty shoddy behaviour by NX.

 

[thedbdiboy]

It's not based on date of sale. Where the date of use is known (e.g. day tickets) it will be allocated to the operator in harness on that day. In the case of period single or return tickets there will be an assumed date of use for each portion which won't be 100% accurate but is agreed as the standardised calculation. Seven day Seasons will be allocated as per first day of validity whereas Monthly and longer tickets are allocated via the suspense account to be split between incoming and outgoing operator. This is now a well established set of protocols, there's nothing novel about the changeover.

 

[Belperpete]

It's not based on date of sale. Where the date of use is known (e.g. day tickets) it will be allocated to the operator in harness on that day. In the case of period single or return tickets there will be an assumed date of use for each portion which won't be 100% accurate but is agreed as the standardised calculation. Seven day Seasons will be allocated as per first day of validity whereas Monthly and longer tickets are allocated via the suspense account to be split between incoming and outgoing operator. This is now a well established set of protocols, there's nothing novel about the changeover.

Thanks for the explanation. I wasn't suggesting there was anything novel about this particular changeover, I was just using it as an example.

There would appear to be an enormous amount of book-keeping to be done. From what you say, every season ticket that has been sold in the year prior to the changeover presumably needs to be analysed to determine if it involves travel on the affected TOC, and if so that TOC's portion of the proceeds needs to be allocated to the suspense account to be further divvied up according to the duration remaining after the changeover. Likewise every ticket that is sold anywhere within the UK within the month prior to the changeover presumably needs to be similarly analysed. Hopefully there is some software that can do most if not all of this automatically?

 

[swt_passenger]

Thanks for the explanation. I wasn't suggesting there was anything novel about this particular changeover, I was just using it as an example.

There would appear to be an enormous amount of book-keeping to be done. From what you say, every season ticket that has been sold in the year prior to the changeover presumably needs to be analysed to determine if it involves travel on the affected TOC, and if so that TOC's portion of the proceeds needs to be allocated to the suspense account to be further divvied up according to the duration remaining after the changeover. Likewise every ticket that is sold anywhere within the UK within the month prior to the changeover presumably needs to be similarly analysed. Hopefully there is some software that can do most if not all of this automatically?

ORCATS and LENNON will be doing it on a day to day basis anyway, as far as I recall from previous discussions. I don’t think a franchisee change will be that difficult to handle.

 

[Andrew1395]

ORCATS creates a set of allocation factors that Lennon uses to apportion sales. Lennon is far more complex. For example doing all the accountancy reporting of sales and earnings. Season tickets (Lennon considers a 7 day to be a weekly ticket not a season ticket), are reported through the season ticket suspense and daily journey factors are applied to it. At a franchise change the season ticket suspense account transfers, but of course the new franchisee has not banked the cash achieved at sale. So often the outgoing franchisee has to pay the new operator a cash adjustment to cover the transferred liability of honouring the season tickets. These cash adjustments also apply to other sales and products. Most obviously tickets sold in advance, but not fulfilled until printed as a ticket on departure product.

 

[island]

This happened after NXEC had a massive "seat sale" as they handed the keys back. Getting £9 tickets on a peak train into London was hilarious as a passenger, of course, but was pretty shoddy behaviour by NX.

SWT, by contrast, declared the last two weeks of their franchise to be void days.

 

[MikeWh]

SWT, by contrast, declared the last two weeks of their franchise to be void days.

Wasn't that when Waterloo was half closed?