Virgin policy makes no sense

Given that some £5bn of public money is pumped into the railways annually, it would seem incumbent on the government to explain what precisely that subsidy is for. I am not for a moment suggesting that it is wasted, but it would be helpful to have some intellectual underpinning to justify this huge expenditure.

Let’s postulate that one of the reasons why ministers are happy to spend this money is that the railways stimulate economic activity and provide a vital alternative to the car which is both environmentally more sustainable and, quite often, far faster. Then surely to justify this huge sum, as many people as possible should be encouraged to use the railways.

But the present fare structure does not remotely ensure that the use of the railways is maximised. Indeed, quite the opposite. By ensuring that the train operators much of it is geared either maximising the return for train operators or to deter people using trains at peak times. Take the Virgin West Coast services. These have recently been upgraded, helped by £9bn worth of trackwork, to provide a twenty minute frequency between Euston and both Manchester and Birmingham.

This level of service mean, effectively, that one does not need a timetable. Just as say a ten minute frequency on suburban services obviates the need to check up train times, so does three trains an hour for long journeys across Britain.

It should, therefore, be a turn up and go service. Yet, passengers who follow this logic suffer a great penalty. People who have not bought tickets in advance face paying fares which can be fifteen or twenty times the cheapest pre-booked ticket and routinely are double or treble the fare. The logic, from Virgin’s point of view, is that it wants to encourage people to use off-peak trains and, moreover, it gets to keep all the revenue from advance tickets, which can only be used on its own trains, whereas it has to share income from flexible tickets with other operators

However, this greatly reduces the incentive to travel by train. People are bemused by the complexity of tickets – I just went on a National Express website where the ‘anytime’ ticket from London to Lincoln was £20 cheaper than the off peak one! – and crave for a simpler system. Moreover, the train operators would then be able to advertise their cheaper offer far more widely and attract people onto the trains.

To give an example, I just travelled from Glasgow to London and by booking in advance I paid £59 50 rather than the normal off peak fare of £107 80. However, had I had booked earlier, I would probably have been able to pay just £43 50 on most trains. This is madness. There are 13 trains per day each way between London and Glasgow, almost twice as much as before the new high frequency services introduced in December. The logic would be to have a clear basic fare available on all trains which would then provide real competition to the airlines – say £50 one way, £100 return (none of this nonsense of paying £1 extra for the return).

Virgin is reluctantly beginning to understand this logic. Its spokesman, Arthur Leathley, told me that it will introduce a standard fare system on some routes – not though involving London – in the next couple of months as a way of testing the system. However, he stressed that Virgin’s concern about going down the path of standardising its fares in this way across the board was ‘we do not want to to make the situation worse on overcrowded trains’. Quite apart from the fact that with the 30 per cent increase in capacity, that is no longer an issue, it is a strange argument, suggesting that Virgin does not want extra passengers if they won’t travel at a convenient time for the company.

The other argument used against adopting low and fixed walk on fares is that it will result in revenue loss. In fact, Northern Rail found that revenue increased when it lowered fares on the Settle – Carlisle line.

The fundamental point is that since it was the public which paid for the line upgrade and is continuing to subsidise Virgin to the tune of £300m this year – the lack of logic in the rail subsidy system is demonstrated by the fact that the poor operator on the East Coast has to cough up a vast premium payment of £85m. Therefore, the public should be given as much access to the rail system as possible. If it were an entirely private enterprise, such as Ryanair, then it would be fine for the train companies to operate such a restrictive practice but it is not. It is time the Office of Fair Trading took a look at this issue and stimulated a debate into the lack of logic pervading the fares system.

  • RapidAssistant

    The availability of sensible fares definately have deteriorated on Virgin even with more trains. I used to guarantee I’d be able to get the lowest Advance fare on Glasgow-London if I kept my eyes fervently on the website and waited for the 12-week booking window to open. It did this morning for the service I want to travel on in June and found that only the most expensive ones (£59) are available at inconvenient times, as for the most convenient services – the limited stoppers – not a single Advance ticket to be seen – just the whacking great £107 return as you say. As I’ve said before, my latest ploy is to take out a Virgin credit card which allows you to access a hidden part of the Virgin Trains’ website and I ended up getting a single on a mid-morning service for a tenner.

    An even more bizarre pheonomenon I’ve come across a few times is that sometimes that the only available Advance fare in Standard Class only costs £7 less than the lowest First Class Advance one which is still available. And given Virgin do free meals and booze on weekdays it’s a no-brainer isn’t it??? It seems like yield management gone crazy to me that they are willing to drop the price of First Class to almost lower than Standard, then have to bear the overhead of wining and dining those passengers for free once they are on the train.

    I would have thought that with much more capacity they’d be piling it high and selling it cheap – clearly this isn’t the case.

  • Dan

    Barry Doe regularly makes the very valid point that once you have booked an Advance – there are no longer x trains per day – just one – the one you are booked on!

    Back in the old days I recall BR at Euston would have a queuing system on busy trains on busy days for those who had not reserved, then being issued a boarding card preumably until the seast ran out. Somethign like this migth work for people who want to travel with cheap Advance Tickets on the ‘wrong train’ they must queue – at least at key stations – for available seats? Could this work?

    I’m convinced the ‘perverse’ incentives included in the ‘ORCATS’ regs causes much of the problem – as if that was not there what would be the reason to restrict ticket use of discounted Advance tickets so tightly (unless you work out the statistical % of people who will inevitably miss the train / get confused etc etc and who can then be charged a premium ticket – and build that % into your business calculations!)

  • RapidAssistant

    Is it too simplistic though simply to have a more rationally priced turn up and go fare (backed up by more capacity of course), and providing the product that people actually want, when they want it??? Personally I’d rather see less of these crazy cut price deals (like the ‘£5 to anywhere’ one that NXEC were doing a month or two back), in return for the priviledge of being able to go when I want at a reasonable price without wasting my employers’ time glued to my PC screen whenever the calendar hits the magic 12 weeks before I am due to travel. London-Glasgow off-peak return has shot up from £70-ish a few years ago to a whopping £107 today. And now that the new timetable has fiddled with the rules about when you can use off peak returns (nee Savers) you could easily be looking at £200+. That’s an awful lot of inflation if you ask me.

    And as my post above demonstrates – actually getting ANY Advance fare (never mind the cheapest one) is becoming more and more of a lottery these days. I get mailshotted by easyJet and BMI at least once or twice a week and deals like Glasgow/Edinburgh-London for £35 return (including taxes) is not uncommon (and quite easy to find, as I’ve discovered).

  • Michael Weinberg

    The old chant to referees ‘ you dont know what you’re doing’ could equally be applied to Virgin management.
    They’ve just reduced the fares from Milton Keynes to London having spent the last few months explaining why they dont want the scruffy yobs from this town spoiling the journey for their ‘long distance customers’!
    Who knows, they might even restore our direct links to the North as their ‘long distance customers’ desert them.

  • RapidAssistant

    It’s interesting though that Virgin are reporting falling revenue – the first operator to do so. some industry pundits are blaming it on the rise of internet sales, and people looking out for the discounted fares, yet the conundrum for the operators is that if they start limiting the availability of Advance tickets, people will vote with their feet anyway because the costs of full fare & off peak tickets have risen so sharply in recent years. That’s dangerous when they know that long distance travellers have the option of flying.

    Which brings me to another disparity in that full service network airlines like BMI and British Airways’ domestic operations are inherently loss making as standalone services – yet some of that “loss” is absorbed by the healthy profits made on the long haul flights that many passengers on those planes are connecting with. Because of this cross-subsidisation, is it not true that such airlines can afford to sell heavily discounted point-to-point domestic flights a lot sooner to the departure date compared to the equivalent railway journey?

  • Anoop

    The way to maximise revenue is to sell services at a higher price but give customers more than they need, so they feel they are getting better value for money.

    There should be a national railcard available to everyone (not just young / old / disabled people), in order to reward loyal passengers.

    I propose a new fare system:

    1. All journeys and tickets are classified as ‘peak’ or ‘off-peak’. (Rationale: clarity and simplicity)

    2. All tickets bought with a railcard will include the railcard ID number and will be valid only with that particular railcard. (Rationale: to enable railcard users to be given extra benefits, and make it difficult or impossible for people to sell a ticket after a journey)

    3. A new one-day rail pass, costing £99, giving unlimited travel in the UK for one day, only valid with a railcard. (Rationale: people spending this much on train travel in a single day should be given special benefits, such as the freedom to travel where and when they wish)

    4. A national railcard, costing £120 per year, giving 1/3 off all fares, including a free one-day rail pass to be used on a day of your choice within the year of validity (Rationale: encourage loyalty)

    5. All tickets are sold as single tickets. (Rationale: simplicity, flexibility)

    6. All tickets bought with a railcard include free bus / tram / local rail travel within the region of the destination, as long as the cost of the corresponding regional day pass is less than the cost of the actual ticket (e.g. a ticket from Manchester to London would automatically include a London Travelcard). (Rationale: if a journey is difficult to make by public transport and involves multiple interchanges, it should not cost more than a straightforward direct journey of the same distance)

    7. ‘Peak’ tickets bought with a railcard include unlimited off-peak travel on the route. (Rationale: giving people freedom in return for buying an expensive ticket)

    8. Cheap ‘Advance’ tickets are available for particular long distance journeys on less busy trains. (Rationale: avoid overcrowding of busy intercity services)

    9. All tickets can be exchanged or refunded before travel. A small fee is payable unless the new ticket costs more than the old one. (Rationale: allow people as much freedom as possible to change their travel plans)

  • Chris Sharp

    What I find most perplexing in this day and technological age is that when I show a ticket on a train someone punches a small hole in it.

    Surely the time has come for every guard to have a ticket swiper so that each ticket can be accounted to a particular train. This would mean that Virgin would be able to get all the money for every journey made on their trains and NXEC wouldn’t have to worry about Grand Central raiding their fares box.

    Yes ITSO is coming, but does it have to be as complex as that?

  • RapidAssistant

    Good point Chris – look at the airlines which have a 2D barcode on your boarding pass which contain all the information about your ticket and journey, that even your PC printer at home can recreate, so it opens the door for true “print at home” ticketing (that can also be delivered via mobile text messaging) which would get rid of the cost burden of printing tens of millions of tickets.

    As you say, barcode scanners are so cheap, compact and reliable these days so it would be easy to implement. Yet the railway is still soldiering on using a descendant of British Rail’s APTIS system which is based on old fashioned magnetic strips.

  • Dan

    Chris – you’re lucky – punching a hole! East Mids Trains staff use a biro and scribble something on your ticket – usually a wiggly line – your child could inadvertendly do this, thus invalidating your ticket! Can they not even afford hole punches?

    I recall being told once by a ticket collector at the gate in Brighton (back int he 80s when edmundson’s ruled) that their gate punches cut a shape in the form of a ‘B’ so that they knew if you had been through that gate – and they did. Presumably there were once a variety of shaped punches for dfifferent locations?

    Your plan is flawed however, because the staff who mysteriously dissapear whenever the train is heavily delayed, overcrowded, or because they assume ticket gates (often installed but simply locked open as they do not have enough staff to keep an eye on them) are in place would have to get out and about and actually check tickets properly. Surely that would be too much to ask….

  • RapidAssistant

    Well, even before barriers were installed at Glasgow Queen Street station, the ticket inspectors simply just glanced at the ticket and said “thanks”. I always wondered if they actually were able to take in all the vital statistics from the ticket in less than a second.

    Virgin and NXEC seem to always use the crimper things that stamp a number on the ticket, but sometimes it’s barely legible. Indeed, on your point Dan about overcrowded trains – I remember once being on a Manchester-bound Pendolino that didn’t even make it out of Euston as the doors refused to lock. Maybe it was tempting fate as the train manager had just read out the penalties for having the wrong ticket for the train – we ended up being “consolidated” with the next Manchester train which of course was packed to the gunwhales. My ticket wasn’t checked once as presumably the conductor couldn’t be bothered fighting his/her way through the aisles. I’ve even managed to go London-Glasgow once without my ticket ever being checked at all!

  • Roland Harmer

    Oh for goodness sake, why can’t we treat our railways as a national asset and just charge a standard rate based on pence per Km, or mile if you prefer. You might add a discount for return tickets and off peak travel. Railcards – possibly. Keep it simple.

    A complicated fares structure puts people off rail travel and is a huge waste of time. Has any one done a study to determine the amount of time invested, or rather lost, nationally in trying establish the cheapest fare on a given route? Other comments on this thread show what a shambles the private enterprise system can become when objectives are not clear and when it is not well regulated.

    It seems likely that the railways will always need a subsidy, either as a whole or in part, because the benefits that they offer the community as a whole can never be recouped from the fares.

  • David

    I came across an interesting situation a few weeks ago when I tried to purchase some advance tickets for a return journey between Derby and Warminster.

    Its a journey I’ve done before, and my first thought was to change at Bristol Temple Meads. Now those of you familiar with the Cross Country timetable will know that it suggests passengers who have to change trains should avoid Birmingham New Street if possible, and identifies four stations – including Derby – as alternatives. But when I sought a chap fare between Derby and Bristol (and for the return journey), every reduced fare ticket required a change at New Street!!!

    In the end, I found the cheapest option was Derby-Cheltenham Spa (£14.50), then Cheltenham Spa-Warminster (£4 – yes, that’s right £4!); the total cost was cheaper than the lowest fare I could find with Cross Country to Temple Meads (I think that was £21 with a Birmingham change). Coming back on a Friday afternoon, I had to buy an off-peak single to Cheltenham, and from there I was able to buy an advance ticket back to Derby (also at £14.50); but this ticket is on a train which has come through Bristol, and for which no “cheapos” were available between that city and Derby!

    The NRES website didn’t give me this route for journeys between Derby and Warminster, so it is only someone who has a knowledge of railway geography and routes who would find it; I think that’s wrong.

  • William Shearer

    Virgin’s policy is a strange one.
    Take London – Birmingham: Virgin have increased capacity by 30%, then reduced “Advance” fares to £5 (even lower with a Railcard), because this extra capacity has to be filled. Is it just me or is there something amiss here?

    And yet, with my last few trips to Scotland, the airlines have consistently been better on price, by quite some margin. And British Airways gives you a meal!

    One thing that NXEC / Virgin miss is that many passengers (myself included) would be happy to sit in a standard class seat for 1-2 hours, but for longer journeys First Class is the only option – and First Class pricing is ludricous. So if I have to pay a Standard Class fare, I’ll fly instead.

    I don’t particularly like comparisons to airlines, because airline pricing IS complicated, but is hidden by effective marketing, and also, most flights don’t have numerous stops enroute! However I have seen cases where an A to B to C flight is cheaper than just a B-C flight. I digress…

    I agree that buying rail tickets in the UK is complicated, and to a certain extent I would expect that from a network as diverse as ours, where any one service caters to a huge range of markets, but I am seeing more and more either rock bottom or skyhigh fares for a lot of journeys. With the “Saver” effectively hidden by the new fare names, I am not surprised that revenue is dropping.

  • RapidAssistant

    One area where the TOCs argument about how Advance fares are cheaper falls flat on its face is in the return journey. It’s all very well finding an el cheapo ticket to make the outward journey, but it isn’t worth a damn if there is nothing available except full price fares on the day/time you want to return. Following on from William’s point I’ve seen me getting a £17.50 Glasgow-London fare, but when I try and book the return, there isn’t anything except full fare tickets. If I’m lucky, I can use the ECML to get back, but if that is screwed as well, then I have to resort to a cheap flight instead.

    I mean what’s the point of saving £80 on the outbound, then having to pay £106 to get back? You may as well have not have bothered!

  • Dan

    I work on the basis that if you can’t make at least £10 over the return saver fare (or whatever it is now called) it’s not worth booking ahead due to the massive loss of flexibility (and the waste of time trying to find el cheapo) that comes with Advance tickets. Where this does not apply is the ability to book cheap Advance First class that gain a step change in comfort at a price not comparable to the Std Class Saver’s flexibility. I wouldn’t fly short hall ever (as I don’t have time priorities on those distance journies as I don’t travel that far for work basically), but I can see why you’d end up flying if price was an issue.

    I suspect over the longer distance (eg London Scotland) UK rail has lost the market share to the planes – and most travellers are doing shorter sub lengths of the journey – it’s just operationally conveneint to run the train all the way London – Glasgow with stops for the sub journeys. Of course this is an argument for HS2!

  • RapidAssistant

    You’re right Dan, and as we’ve said countless times before, people need to wake up to the real cost in terms of time by flying – they aren’t a point to point journey either because of the need to travel to/from airports at either end. “Cheap” flights from Scotland to London invariably land in either Luton or Stansted, both of which are 45 minutes away from the centre of the city (on an expensive train you can’t book in advance….). Luton uses regular Thameslink services which are invariably clogged with commuters if you hit the city at the wrong time, whilst a premium price is charged on the Stansted Express. Heathrow is the best of a bad bunch, which will cost you £4 on a pretty dreary 50 minute Tube ride (discounting of course the fast but hideously overpriced Heathrow Express).

  • John

    William Shearer: “And yet, with my last few trips to Scotland, the airlines have consistently been better on price, by quite some margin.”

    Travelling between England and Scotland demonstrates how big a difference booking ahead and split tickets can make. I recently booked a head by 3 days (no split ticket) and paid £30 for a return from Birmingham to Edinburough. Another time, the price for the next day’s train was £160 until I used split-ticketing and reduced price to £55.

    It’s ridiculous how much of a game the TOC’s make it into.

  • Christian

    That’s bonkers – can you please explain what you had to do in terms of the split ticketing?

  • Paul

    If the TOCs want to be like low cost airlines – and I don’t for a minute support this idea – then why are they unable to do it properly, so that an almost-empty train will have reasonably priced tickets available up until the time of departure, but on a very full one tickets will be priced highly or not available at all? This is proper demand management in the 21st century, not some convoluted combination of allocations and ‘buy before’ dates that results in three-quarters empty trains rolling around and the taxpayer rightly asking what it’s all in aid of.

    Eurostar seems to demand-manage pretty well, as do TGV and Thalys services. Flexibility is available through ticket exchange on slightly higher fares. Is it the myriad of privatisation ticketing regulations that put these simple ideas out of reach?

  • RapidAssistant

    I’ve never used split ticketing myself – although I’ve seen how it can work on Glasgow-London, by doing the split at Preston, buying Glasgow-Preston, Preston-Euston on the same train turned what would have been £59 on one Advance ticket down into two £12 legs.

    Interesting place to get info on split ticketing is on Martin Lewis’s website http://www.moneysavingexpert.com which goes into all sorts of ways of playing the TOCs at their own game.

  • Dan

    Split ticketing on railcard boundaries can be a useful idea at times (basically for most people this means the Network Card boundary) – or for older lags the NSE area! Given the network card provides an off peak railcard to anyone it is quite useful (despite the reduction of benefits from the into of the weekday £10 minimum fare) – if you are travellign into / out of the NSE boundary on a longer journey of course.

    This makes the case for a national railcard after all. I’m not really sure why as a single adult with no children for a 32 year period (between ages of 27 and 59) I pay full price – whilst others get discounts – after all this method does not apply to my water charges for example, or my road tax, petrol taxes etc? – the whole railcard thing is an anomoly really – I’d favour getting rid of all the diff types of railcard and replace them with one national railcard that anyone can buy whatever age they are and then get a discount. OK maybe retain child fares, but then there could be a children’s railcard that would give those under 16 a further discount.

    Is this an unreasonable suggestion do others think?

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