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Virgin Trains proposes airline model for long-distance rail travel

24 Apr 2019

UK: A complete rethink of the way long-distance rail services in Great Britain are operated forms a key part of Virgin Trains’ submission to the government’s Williams Rail Review of the rail industry.

Despite the possibility that Virgin Trains will cease operating rail services in the UK within the next year, its joint bid having been disqualified from the West Coast Partnership competition, it has decided to release its proposals in order for a wider audience to understand its thinking.

Airline model

Virgin Trains proposes root-and-branch reform which would see long-distance rail services being operated along similar principles to air routes. This would include the sale of ‘slots’ on the network, a ‘more positive development environment’ for stations, and the creation of a single independent and strategic regulator.

Franchising would be replaced by a model under which long-distance operators would bid at auction for bundles of train paths which they would own indefinitely. This would enable multiple operators to serve long distance markets and allow market forces to ‘drive the quality of customer services up and fares down.’

In addition to the one-off payment, operators would commit to paying the government a percentage of their profits from that service. Virgin Trains suggests that the regulator auctioning the slots would have to fix either the price of the bundle of slots or the percentage of profits, leaving market forces to decide the level of the other variable. Operators would be free to give up or sell a slot, with the regulator able to approve or deny any request to add or remove stops within a particular train path.

Slots for lightly-used trains could be bundled with peak services to allow cross-funding, which would reduce the sums paid to the treasury but effectively provide a subsidy for that service. Virgin Trains suggests an alternative would be for the lightly-used trains to be provided by a state-owned and subsidised operator.

Virgin Trains suggests its model would solve the problem of franchisees defaulting due to the inability to pay tightly-agreed premia, with no payment due if the business makes a loss.

Compulsory reservations

Virgin Trains proposes a ‘second, vital, step’ to import the airline model by moving to reservation-only trains. The ticket price would be based on demand, so as the train filled up, the price would go up. But there would only be one price for each train at a given point in time, with no peak or off-peak distinction.

Standing on trains would be ‘all but abolished through a reservation-only system’. Flexible or season tickets would still be available, but users would need to book a seat rather than simply turn up for any train. Reservations could be changed for another train if seats were available, but passengers could only hold one reservation at a time.

Commuter and local travel

While Virgin Trains believes an airline model could be transferred to the long-distance rail sector, it says a different approach would be needed for shorter-distance routes where ‘seamless functionality is more important than cutting-edge innovation and higher-end customer experience’ and commuters value the ability to take the next train whenever they finish work.

It proposes two options for commuter operators, either a management contract where the revenue risk is borne by the government or a public-private partnership. It expresses concern that this would carry the challenge of setting incentives, and proposes a long-term concession model, along with more regional devolvement of spending and control.

Responses

‘Do passengers really want compulsory reservations?’, asked Anthony Smith, Chief Executive of watchdog body Transport Focus, in response to the proposals. ‘Some people will always need to just turn up and catch the next service. Others rely on long distance trains to commute to work over parts of a route. Whether what Virgin is proposing could accommodate this is something the Rail Review must consider carefully.’

Mick Cash, General Secretary of the RMT trade union which supports nationalisation, described the proposals as ‘a deregulated free-for-all where private train operators slug it out on the most lucrative routes on a slot by slot basis’. He claimed this ‘would lead to total chaos with passengers trapped in a transport nightmare of escalating fares where prices rise by the minute according to availability.’