Rail fares and franchises - Transport Committee Contents


Examination of Witnesses (Questions 160-177)

MR COLIN FOXALL, MR MIKE HEWITSON, MS SHARON GRANT, MR TIM BELLENGER AND MR RICHARD ROWSON

4 FEBRUARY 2009

  Q160  Sir Peter Soulsby: You say that it has reached about 16% at the moment. How far do you think that can go?

  Mr Rowson: It is a difficult one to answer. Rail is very different to perhaps the air industry where an airline is probably targeting getting itself 80% or 90% of sales on-line. We should not forget that in the rail industry a big part of the value proposition of rail is the ability to turn up at the station and travel without having to pre-book and pre-arrange your journey. We have seen 100% growth in on-line in the past four years. I would hope to see the same again over the next four years. Obviously it reaches a point where that will plateau. It is probably, in part, being driven at the moment by fare increases in the flexible tickets, which is what a lot of the headline discussion has been about today, and those average prices, which is encouraging people to plan ahead and hunt out the £5 Birmingham to London or the £8 Manchester to London fares.

  Q161  Sir Peter Soulsby: Do you think compared with the sort of deal that you are able to offer people that those who just turn up and face either a booking clerk or, worse, a machine, get a pretty poor deal and do not get the full range of options that you would offer them on-line?

  Mr Rowson: It is not so much a case of whether it is on-line or face-to-face; it is merely down to the time when the customer makes the transaction. If the customer chooses to go to the station the day before they are travelling, they would get offered exactly the same fares that we can offer them on-line. What there has been a definite move towards is continuing to reduce that advance purchase horizon. On some routes it was up at 48 hours a few years ago. It has largely come down now to midnight the night before. Some of the train companies are talking about ten minutes prior to departure still being able to purchase the best value advance fares.

  Q162  Sir Peter Soulsby: Perhaps some of the other witnesses can comment on whether in fact those who turn up and try and use the machine get the full range of options that one gets through either of the other mechanisms?

  Ms Grant: Our evidence is that machines are not always as effective as they might be in giving people the best value fare. This is one of the reasons why certainly at the moment we are deluged with complaints about the current proposals to close ticket offices and increase reliance on machines. I do not know if Tim might be able to add more detail to that.

  Mr Bellenger: I have often said to friends that in terms of ticket vending machines what the railway industry has done is they have taken an operating system which is suitable for a trained booking clerk and they have literally just dumped it on a machine and said to the public, "Get on with it, you, the great untrained public, can now access your tickets in the same way that a trained booking clerk would be expected to do." For most customers that is actually quite a daunting prospect. I am amazed when I go to a ticket vending machine with a group of friends how often I have to physically teach them how to use a machine, about where they can find rail card discounts for example, or whether they can get a discount travelling as a group.

  Q163  Chairman: Has any of this improved?

  Mr Bellenger: I think the answer is probably not at the moment.

  Ms Grant: There are certainly some ticket machines that we are aware of where you cannot actually buy a ticket to all destinations. We have a case in point at the present time, do we not?

  Mr Bellenger: Yes, we do. In the case of South West Trains, they offer on their ticket vending machines only a range of what they call the 900 popular destinations. On the national rail network of course there are over 3,000 destinations. The interesting thing about what South West Trains do is that in a number of examples, in fact, another train operator actually runs trains from a South West Trains station to another station but that other station is not on that ticket vending machine's list of acceptable destinations.

  Q164  Sir Peter Soulsby: I wonder if you have any suggestions as to how that can be dealt with, particularly these machines, which do seem to be the worst possible deal for the passenger. Either on-line, I think probably being the preferred one, since you can get all of the options there, or face-to-face, seems to be the advice to give to any passenger?

  Mr Hewitson: Certainly the research we have done looking at the barriers to using ticket machines is that for relatively short distance journeys, where there is no real choice of tickets, you can navigate your way through the system. It is the more complicated journeys that require face-to-face contact. You can replicate some of that on the internet but it can be very confusing working out the times you are going out and the times you are coming back. That is a difficulty. In terms of getting round some of the points you mention, the ticket-on-demand facility, whereby you can use the internet to do the queries, to work out the journey, purchase it and then pick it up from the machines, so the machine becomes a retailer, just a vending machine as opposed to a purchasing means, that can sometimes help. However, people tend to trust people. Particularly now with revenue protection increasing, that sense of being caught without a ticket or the right ticket and as well the huge costs you can sometimes pay by being on the wrong train with the wrong ticket, that is a barrier, it is a worry to people.

  Q165  Mr Martlew: Just on that point, very often the cheapest ticket to buy, say for example if I am coming from Carlisle to Manchester, is a ticket to Preston and then one from Preston, but the machines do not tell you that, do they?

  Mr Hewitson: No.

  Q166  Mr Martlew: Very often the booking clerks will not either because they are instructed not to, very often that is the case?

  Mr Hewitson: It is a classic case where if you know the system you can sometimes find some good savings. There are conditions attached to that combining of the ticket. The train has to stop, et cetera. If you know your way around the system you can save an awful lot of money at times.

  Q167  Sir Peter Soulsby: Obviously we are very keen that there should be wider knowledge within the travelling public that there are options, and I just wonder who you think should take responsibility for making sure that the public has that awareness, that either doing it with a booking clerk or doing it on-line is likely to produce options and some better value?

  Mr Foxall: It goes back really to what I was saying earlier that what we are looking for in many of these systems is greater transparency. There is a duty on the industry, but I think there is a duty on people like Passenger Focus to encourage the industry to do that, and we are doing that. I think there is also a duty on the Government to see that it gets written into the franchises, and that they use their own influence to achieve those things. I agree with you that ticket retailing is going to change, it is going to become more electronic, but we are in a shoulder period where we have got various systems in operation and we have to cope with them as they are. The other remark that I would like to make is that you should understand that if you go for a majority book-ahead system, you will change the nature of the railway. A turn-up-and-go railway is still an important railway and people who book and commit themselves to a particular train, as my colleague said, find themselves exposed to no flexibility, very possibly, depending on what sort of ticket they have bought, and if they end up on the wrong train, for whatever reason, not necessarily for any malicious reason but simply because they miss a train and they have got to get the next one, and they have therefore sometimes thrown away that whole ticket, that is a penalty, and it is not something people know about, so we have to think much more openly about how that is managed.

  Mr Bellenger: Could I just add to what Colin has said there in that in answer to your original question the airlines model has its limits particularly for commuter railways. Commuters invariably want to have that flexibility, and that is why they pay the much higher up-front costs. I think there are limits to the extent to which the airline model can be applied to local travel particularly.

  Q168  Sir Peter Soulsby: Really just to wind this up, what is your perception of how the changes and standardisation of names and the simplification of the ticketing system has been for the passenger?

  Mr Foxall: I think we are in a halfway house. It was never seen, despite the way some represented it, as the magic solution to everything. The idea was to make a movement forward. We did a certain amount of research on names, to help in choosing the names, and they got a better recognition than the previous names, but it is the first step in a series of changes that has to be made in the rail industry, dealing with issues like flexibility, perhaps undertaking always to sell the cheapest ticket to you when you ask for a journey and so on, which the industry is working on with our encouragement. There are numerous things we have to do. There is not a magic bullet to change the whole fare system overnight; I wish there were.

  Q169  Ms Smith: Would you defend the practice whereby passengers can still jump on trains and buy tickets on the train? Do you think that at the moment they pay a penalty for doing that and do you think that is an unfair penalty?

  Mr Foxall: In principle, yes I do. Clearly it is a bit difficult to be absolutely blanket about it because it depends whether you think people are trying to evade fare paying. Where we are convinced they are trying to evade we are very strongly in favour of revenue protection operating. That is the kind of flexibility that I was really talking about earlier on that I think ought to be in place. I do not see why train companies should treat passengers as though they are recalcitrant prisoners or whatever. They are customers and if they are travelling on a train and they do not have the right ticket maybe, yes, there should be an administration fee, or some such, if you want to upgrade, but it should not be excessive and it should not be unreasonable. I think there should be some reasonable presumption of innocence instead of the huge presumption of guilt before we start. It is up to the train companies and all of us to work in trying to prevent fraud and so on.

  Q170  Ms Smith: I ask this question partly because, in Sheffield, East Midlands Trains are wanting to put barriers up so that nobody can get on a train without a ticket. I am one of those who unfortunately regularly jumps on a train because I have decided at the last minute that that is a particular train I want to London; I do not have time. Barriers would work against what is at the current moment a public access from communities in the Park Hill area of the city into the city centre. There is a huge dispute about this and I just wonder about Passenger Focus's view on that kind of impediment to public access to stations and platforms.

  Mr Foxall: I think in general, as a piece of policy, we are in favour of gating simply because it ensures revenue protection. What has to go along with that is proper, quick, reasonable and simple access to tickets. Dealing with your point, I think what needs to go along with it is reasonable flexibility, and having bought the ticket, if it turns out not to be absolutely the right one, you can change it on the train or change it when you get off the train without there being a penalty, so a more customer-focused kind of approach to dealing with the problem. I think it is difficult to argue against gating because it has big revenue protection improvements. Answering earlier points about who pays, that ensures the passengers do pay their share, and that is an important thing.

  Q171  Ms Smith: Gates at platforms perhaps rather than whole stations?

  Mr Foxall: Possibly so.

  Mr Hewitson: We have general support for the concept of gates but it has to be on a "horses for courses" basis. It has to suit the station in question. That is an important caveat; it has to suit public access to a station, and in many places railway stations are cut across the line and they are as much about getting through the station rather than using the trains, and that has to be factored in. Can I go back to one point where we talked about ticket queues as well. I think ticket queues are a particular issue, being penalised for having to stay five, ten, 15 minutes in a ticket queue and then if you jump on the train you are punished by way of penalty fare or higher fare. That is one aspect where, yes, you should be able to board a train and buy a ticket with no penalty. If ticket gates are being introduced, then there needs to be a very active and very carefully managed programme of monitoring the ticket queues. I think that is an area that the Department in its franchise monitoring should really focus on in that sense, and be a condition almost of the gates.

  Q172  Ms Smith: Just one further question, you have said previously that we need to look closely—this is a different issue—at establishing a fairer link between fares, investment and satisfactory performance. How do you think that a fairer link would actually work? I think this is a really interesting issue and one I was exploring earlier with the operators. How do you think this would work?

  Mr Hewitson: We used to have one. There used to be a link between performance and fares. There was a long gap between, again, this July point and December, so a good performance in July would lead to high increases in fares in January. Meantime between July and January the performance had dived and you had this disconnect again, so I think there is always a risk. What we would say is that it is more than just punctuality. There is a whole other range of service quality issues that somehow need to be factored into the assessment of which line get a 5% increase, which line gets a 10% increase, and which line gets nothing at all. We had some examples in the previous January with First Great Western whereby some routes had nought, some had five, some had ten. The 10% increases were going in on the routes that were triggering compensation for poor performance and some of the 0% increases went in on routes that were performing reasonably well. It is harnessing that type of disconnect. I do not have a formula, I am afraid, but I think there needs to be one, that factors passengers' experiences in to what they then pay.

  Q173  Chairman: What types of tickets are being affected by the downturn? Mr Rowson, can you help us?

  Mr Rowson: Perhaps I am best placed on this. I suppose the summary of what we have seen over the past three to six months has not been a noticeable drop in volume of tickets but certainly some shifts within those figures. One of the key areas has been a noticeable step down in the number of customers buying flexible first-class tickets and, at the same time, an increase in the number of customers buying, as you describe, the airline-style first-class tickets. The actual total proportion of first class versus standard class has stayed pretty neutral. There has been a shift certainly within the first-class sector from flexible tickets to the airline-style, train-specific tickets. A couple of other figures that come to mind: the average price a customer is paying this year with us, this January, is 0.3% higher than they were paying with us last January. That would suggest that at the same time train companies are increasing their prices 5% to 6%, there is an element of downshifting between the types of products people are buying, and we are coming out at a fairly neutral overall position.

  Q174  Mr Martlew: Does that mean people are travelling in standard class instead of first class?

  Mr Rowson: No, there has not been a noticeable change in it. What we have seen in our passenger base has been a steady increase over the past five years from about 8% first-class bookings to around 16% to 17% first-class bookings, and that has stayed pretty static for the past six months. The shift has been inside that 16% where people have traded down from fully flexible tickets to specific train only tickets or off-peak tickets.

  Q175  Chairman: The train operating companies this afternoon have assured us that they are not making cuts; they referred to "sensible economies". The written evidence that we have had from all of you suggests something rather different. I take it that you stand by the written evidence that you have submitted? Is there anything additional you would like to say? Ms Grant, you did refer to the closure of booking offices earlier on in your comments.

  Ms Grant: Certainly we and Passenger Focus talk to the TOCs regularly and we have meetings on a fairly confidential basis. It is in everyone's interests that there is a degree of confidentiality, but I think if the impression was given that there is not concern about ridership and revenue and all those issues, I do not think that is the right impression. Certainly the impression I have got is that there is a concern. They are watching very carefully, for example, the number of people who are buying the annual season ticket this year. A lot of people clearly may not be because they might be worried that they will not have a job for the next 12 months, so they will be buying a monthly or whatever. I think certainly the impression that I have is that there really is concern about the effect of the recession, the revenue, and there is concern to cut costs on their part. I do not think there is any other explanation for some of the things that we are now seeing.

  Q176  Sammy Wilson: How do you marry that with the evidence that you have given and the companies gave that there are rising levels of customer satisfaction in all the customer surveys?

  Mr Foxall: First of all, we have to bear in mind that the latest survey was the autumn survey, which has just been published by us, so some of this has not really hit yet. It is not always very clear that fare rises necessarily follow directly through to performance. Performance is the key driver—does a train turn up on time, do I get a seat, et cetera—those are the big things that hit the performance headline and that is what passengers go for. Clearly there is a low level of discontent—not so low if you see the postbag—with the changes to ticket office opening hours. South West Trains has been mentioned and there are two others in the pipeline at the present time for various kinds of changes. We may see some of this come through in the next wave of research in relation to fares and a bit further on maybe in relation to ticket offices. It is difficult for us because I think we have to take a slightly difficult position here. If the companies have to make sensible economies (those are ones that do not directly impact on passengers, or do not overly impact on passengers) perhaps that is not unreasonable given the recession, because there are things happening everywhere. What we have to make a judgment about is do they cross a particular line and do you start to seriously affect services and seriously hurt passengers—is it more difficult to get tickets, do the ticket queues lengthen, are the services really not being carried out properly, or are their maintenance issues, or not. Those are things that I think we have to pay a lot of attention to and we will pay attention to in the coming period. At the same time if we have got to accept train companies may have to make some changes, if ridership falls for example, it will be quite hard to argue that perhaps they should not reduce train lengths for a variety of reasons including environmental ones, but we will want to watch that that does not mean people are being crowded and unable to get on trains or that there are unacceptable levels of overcrowding throughout the country.

  Q177  Chairman: This afternoon the companies also denied that they had been to the Government with a begging bowl or with a request to reduce service standards. If circumstances arose where some of the TOCs did go to the Government with either a begging bowl or a request to reduce service standards, what do you think the Government should do? Would anybody like to give a view?

  Mr Foxall: One of the easier questions to tackle! I think the answer is that we have experienced situations before where the franchisers have been in difficulty and have in some measure or other been taken over or been taken into some form of care. That on the whole has not wholly worked against passengers' interests, so provided it actually looked as if it was going to work in passengers' interests I think we would encourage the Government to take a positive attitude. In terms of reducing services I think we would be much more sceptical and want to look much harder at that whole issue.

  Chairman: Thank you and, on that note, I think we will conclude, and thank you very much for answering our questions.


 
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