A Peer Review on Fares Reform

A Peer Review on Fares Reform by Fitsum Teklu, Associate Director, SYSTRA. A version of this article was first published in the April edition of Rail Review magazine.

There’s a range of differing views around fare simplification, and the difficulties of achieving it. Of course, different stakeholders will highlight their particular bug bare. Some will have their preferred solution, such as single-leg pricing. Yet others define it around a specific manifestation of a complicated fare structure such as split-ticketing, which they would in fact like to get rid of! What is not clear is the extent to which there is any agreement on what fare simplification actually means to different stakeholders.

To help us achieve a simpler fare structure, we must firstly agree ‘the problem’ that we are trying to fix, then de-scope the parts of the current fare structure that are likely to remain. Many would agree that removing fares that are no longer used is a good idea. But, in a system that cannot provide infinite capacity, Advance fares that best match demand with available capacity are a necessity.

It seems to me that there are at least 4 dimensions to fare simplification:

1. Simplifying passengers’ choice – decreasing the number of ticket options, perhaps after aggregating the range of Advance fares typically made available by revenue management systems as one ticket type would probably simplify the choice process but may result in higher fares.
2. Presentation – a related issue to the above is how the alternative fares, and the associated terms and conditions (eg. time/date of travel) are presented online and on ticket vending machines.
3. Fairness – some consider it unfair for the Single fare to not be priced at half the Return fare because it is not logical and because it limits passengers’ ability to mix and match ticket types for their return journeys. Related to this is passengers right to know the cheapest fare for their journey, without needing to check split-ticketing websites.
4. Market segmentation – it is important to recognise that different market segments have different needs, and different approaches will be needed to address the needs of commuters and long distance passengers.

We need to agree what we want to achieve, and be more informed of passengers’ need. For example, recent research established that passengers prefer a more complex fare structure to a simpler one, if the complex structure offers them cheaper fares. This suggests that a very simple distance-based fare structure is not the answer.

Once we can agree on the ‘end game’, it will be far easier to suggest solutions. To this end, we can then identify the technological, commercial, procurement and regulatory constraints that need to be resolved. We can then work towards a transition plan that would address how we get to our desired fare structure through introducing new products, and phasing out old ones. This plan will consider how the franchising system can accommodate such changes and how we mitigate any negative impacts.

The trials starting in May are clearly important for increasing the industry’s understanding of this incredibly thorny issue.