Rail Fares May Decrease; Snowballs In Hell Cheer

Rachel Holdsworth
By Rachel Holdsworth Last edited 111 months ago
Rail Fares May Decrease; Snowballs In Hell Cheer

Ticket_25Feb09.jpg Break out the violins, lads and lasses, for the train operating companies have been told no, the government won't do away with the 1% above inflation cap on regulated fares. With inflation dropping, we could easily have a fall in ticket prices next year and the TOCs tried to cry foul. Poor dears. Yes, we know they're locked into contracts that mean handing over billions to the government, but it's hard to have much sympathy when UK fares are already the highest in Europe. TOCs say they may have to cut jobs - but how would that be any different to what they're doing now? And of course this only affects regulated fares; how much do you bet walk-up and others skyrocket next year? (Though again, how would we tell the difference?) (Image / ooOJasonOoo)

Last Updated 25 February 2009

Mr Thant

The fares are the highest in Europe *because* the train companies are obliged to send money back to the government (or don't receive as much subsidy). The margin the train companies get to keep for themselves is razor thin due to their enormous fixed costs, which is why any major upset in revenue leaves them screwed financially.

The likely outcome of this is that one or more of the parent companies refuses to play ball (the government are essentially asking them to subsidise fares out of their own pocket) and walks away, which leads to the enormously costly business of a temporary government takeover.

RachelH

Well, Stagecoach's profits increased 25% to October, FCC made £48m+ in profit for the six months to September and the parent company of Southeastern made £77m+ last year. When the old GNER franchise came up there were four groups bidding for it - which I doubt would have happened if the government payments were truly crippling.

Payments are large, but it remains that Britain's rail franchises were highly sought after by companies because they were profitable, and managers fixed in a similar blinkered attitude to the financial services industry of 'the good times will stay forever' and didn't prepare for a downturn or pay enough attention to possible risk. Companies happy to rake out profits must also be willing to absorb losses in bad times - or yes, go bust or walk away - if they want to play capitalism.