Rail 403: Competition is weaving a tangled web on ticket sales

With 2.3 million registered users, thetrainline. com has been one of the quiet success stories of privatisation and it was a National Rail Awards winner last year, too. But what’s really needed is a universal ticket ordering service recognised by all operators – and that, says CHRISTIAN WOLMAR, is where the ‘S’ in the SRA’s title should come in….

One of the lessons of the past four months is that we desperately need to reconstitute a unified railway as much as possible. A letter to The Independent recently highlighted just how far we are away from that. Ruth Aylett of Stockport wanted to book a ticket for her son, who is a student in Brighton, to pick up at the station and use it to travel back home.

She rang Virgin but was told it could not sell her this ticket because ‘Brighton is not one of our stations’. She was told to try Connex who told her that they do not run a reservations service. Virgin said her son could go down to the station and apply on the day of travel and use her credit card for a fee of £5.

Unwilling to risk this, the lad went down to Brighton but after a series of phone calls between Ruth, Connex, Virgin and Brighton station, the task proved beyond today’s railway. That is why the boss of thetrainline. com (ttlc), Alan Meekings, has, at the top of his wish list, a ‘national ticket on departure’ scheme. In other words, he wants passengers to be able to pick up tickets at any ticket office in the country which have been pre-booked by phone or internet. That does not seem to be a very radical demand but Mr Meekings says there are already new automatic ticket-issuing machines at some stations which cannot issue his tickets. Integration, therefore, might be on everyone’s agenda but the fragmentation within the industry seems to become more entrenched every day.

That is equally true of the way that ticket selling agencies like ttlc are developing. ttlc has been one of the quiet successes of the privatised railway, winning both awards and lots of customers – 2.3m registered users. But its potential is being stymied by the problems of working in such a fragmented railway and by the industry’s ambiguous attitude towards competition.

Jointly owned by Virgin, 51% and Stagecoach, 49% ttlc started operating two years ago and had built up business to a handy £2.5m a week but Hatfield and its aftermath cut that in half. About 30% of its business is through the web, which is clearly most cost-effective, and the rest from its two call centres in Edinburgh and Dingwall. ttlc claims to be the only ticket retailer that deals with all 25 operators, but 80% of its business is for travel on Virgin because this is the only company which encourages its customers to deal with ttlc. Travel for the whole network is sold through ttlc but the company does not try to generate extra business through the other TOCs for the simple reason that it cannot make any money out of the sales. At present, under the railway’s normal agency deal, ttlc receives 9% of the ticket sales which it handles and that is not enough to be profitable on an average sale worth £55 over the phone or £40 through the web.

Indeed, ttlc is lossmaking but clearly Virgin and Stagecoach, which jointly own Virgin Trains, are unconcerned because it generates so much money for the two Virgin train operations. ttlc’s origins, in fact, came out of Virgin’s desperate need to generate extra revenue in order to meet its daunting franchise commitments, which involve paying an annual premium of £200m to the SRA by the end of its franchise in 2012. Selling tickets by phone and web were seen as essential components of that growth strategy and, according to Mr Meekings, it has paid off: surveys suggest that between a third and a half of those using ttlc would not otherwise have made that journey by train.

However, ttlc’s ownership structure is clearly a barrier to its further expansion. Other train operators are reluctant to hand over an important chunk of their business to allow a company owned by two rivals to make money out of marketing its tickets. But, unless they sign up more companies, at a more favourable rate than 9%, ttlc’s growth will be constrained.

Yet ttlc is playing a vital rôle in boosting rail travel for Virgin and it could do the same for other operators, particularly the former InterCity franchises and other long-distance operators like Northern Spirit and First North Western. If we lived in a sane world, the best way of publicising the ease with which you can buy tickets over the phone or on the web would be on the national timetable part of the Railtrack website, which receives a staggering 6m hits a year. Once a traveller has found their train, they would like to push a button and order the ticket. In a sane world, that is what would be on offer. Currently, only ttlc can offer that service nationally. However, despite lobbying from Mr Meekings, Railtrack has refused to provide a link, saying it’s not ‘a matter of policy’.

Well, the real reason is simpler. Railtrack would not make any money out of it. Instead, two years after ttlc was set up, Railtrack is planning to launch a similar service with FirstGroup, which has three franchises, and it is to be called totaljourney. com. According to the PR man, this service will be all-singing and alldancing, as customers will be able to book travel on other transport modes, as well as hotels and even theatre tickets.

From its own point of view, Railtrack’s actions are perfectly understandable. ttlc is owned by just two out of the nine railway operators and therefore there is no reason why Railtrack should provide ttlc with a free advertising service. ttlc might have got in there first, but why should it be allowed to retain its domination of the market? Moreover, there is clearly money to be made in them thar hills and therefore why not set up in competition?

But from the passengers’ point of view, the whole thing is madness. They want a national rail ticket ordering service able to ensure that people can pick up their tickets at any station on the network. Moreover, having one number and one website address, as with the National Rail Enquiry Service, is an obvious benefit.

Most important, there is a need for a universal system recognised by all operators. At the moment, for example, if tickets are picked up by passengers at a non-Virgin/SWT (Stagecoach) station, then ttlc gets no money from the transaction as the train operator running the ticket office pockets the 9% instead. If Railtrack and FirstGroup set up a rival service, what will happen to tickets being picked up at Virgin train stations? Although retailers have to be impartial, this will clearly lead to a split in the market, with all the operators ended up retaining their own facilities rather than pooling them and gaining the advantages of the returns to scale that a network-wide system would provide.

In a rational world, therefore, ttlc would be owned by all the rail companies or operated in such a way as to ensure it could pay its way by providing a universal service. This is necessary to meet the second item on Mr Meekings’ wish list, which is to provide a service to the quarter of the population who are not able to buy these advance tickets over the phone because they do not have a credit or debit card. Indeed, they are likely to be the ones who most need cheap fares and yet they are being excluded from the system. I once suggested to the SRA that it should consider the ‘social exclusion’ consequences of all its decisions and here clearly is a matter for its agenda.

Which brings us to the SRA. Surely, here again, is an opportunity for the SRA to use the S in its name. Because ATOC is made up of rival operators, it will never come to an agreement over issues like this. Moreover, Railtrack is exploiting its monopoly position by getting into bed with one operator and not another. Its website should also be forced to be impartial. This shows that such services need regulation and direction from the Government via the SRA in order to prevent competition yet again getting in the way of an integrated railway.

Is this the future?

While on the subject of national ticket selling services, on display at last month’s Stagecoach integrated transport conference was a remarkable system which seems to have cracked the problem of providing comprehensive information across all modes.

Xephos, developed by the Southern Vectis bus company which produces the Great Britain Bus Timetable, was able to provide me with information about a journey from deepest Lincolnshire to Exeter using both buses and trains. As the brochure says, Xephos can provide information ranging from “when is the next number 63 from Cosham?” to “how can I get from New York to Moscow by air?”

Its secret, according to the chap running the display machine, is that it does not use an adapted version of the much-hated Microsoft software but, instead, has a custom-made Linux programme. However, so far the Government, which is committed to developing a nationwide public transport information system, has encouraged local authorities to develop them and has, therefore, shunned Xephos. Yet Xephos seems to provide everything that is needed for a truly comprehensive system. Again, some heads need cracking together here.

And one-and-a-bit mea culpas

In RAIL 400, on the subject of a national railcard, I quoted ATOC as arguing that “reducing the cost of tickets by a third would require 50% extra travel in order to make up the loss” and then said: “Leaving aside the fact that the arithmetic was faulty….” Well, several readers have pointed out that the arithmetic was perfectly accurate. If a £30 ticket is sold for £20, then to achieve revenue of £60, you need to sell three, and not two, an increase of 50%.

I have also been criticised for suggesting in the same column that lighting standards at stations should be set according to passenger throughput. Readers pointed out that it was often the least-used stations which were darkest and therefore most threatening. However, I was merely being realistic. The SRA is not going to want to direct large amounts of spending towards the least-used stations. Setting a standard for the busiest stations would be a good start. My idea was to get the principle recognised and move on from there.