Recent troubles facing many train operators have underlined the need for transformative change. Urgent intervention is needed to restore services and reset the industry on route to a more profitable future.
Matthew Flynn is a Managing Consultant at Vendigital. He recently shared his insights with Passenger Transport.
Despite promising figures from the Department for Transport (DfT) showing that rail services have returned to 95% of their pre-pandemic sales, train operators are still struggling to fill seats on off-peak services. Coupled with the current turbulence in the rail industry, train operating companies (TOCs) are looking for security and profitability more than ever before.
While there is no single, straightforward solution, a rapid transformation of the industry’s approach to seat utilisation could benefit both the TOCs and improve passenger experience. With the establishment of Great British Rail (GBR) on the horizon, there is no better time to explore ways to modernise train services.
The Covid-19 pandemic has dramatically changed the way people are choosing to work and where and this in turn has impacted demand for public transport. Shifts in working patterns, and the increase in hybrid, remote or flexible working, has meant that train services are no longer being used in the same way and TOCs need to evolve to reflect this to remain profitable.
Figures released by the Office of Rail and Road (ORR) revealed that at some stations, seat utilisation peaked at 120% during rush hours but dipped to 35% in the middle of the day, resulting in only 40% of seats being utilised across an entire day on average. In comparison, the airline industry, where passenger load is considered a key factor in performance, typically runs at 80%. Britain’s rail network is estimated to be losing an estimated £46m per day which could be reduced by improved seat utilisation.
In broad terms, TOCs have three main options when it comes to driving changes to ensure that seats are utilised in a more efficient and cost-effective way.
Firstly, TOCs could reduce the number of off-peak services. Although potentially difficult to execute as reducing the number of services will inevitably mean that staff requirements will be lower. The figures released by ORR suggest that the current number of services are not necessary to fulfil consumer needs. With employees in the rail industry already striking over pay and working conditions, a move to cut services could further damage the relationship between the TOCs and trade unions.
Reducing the number of off-peak services can quickly become a source of contention for local stakeholders, as seen in August when Avanti West Coast took the decision to reduce its timetable due to labour shortages caused by the “current industrial relations climate”. The train operator has since added more trains and promised to boost services further in December when 100 new drivers are expected to complete training.
Secondly, TOCs could move towards a more dynamic capacity management model. Trains that have fewer passengers do not require as many carriages and could therefore be divided to better reflect the level of demand. For example, a train with 12 carriages running at 40% capacity could be split into two trains with six carriages that have a higher percentage of seats being utilised. The unused section of the train could then run on a busier route as an extra resource to increase capacity. Although this solution comes with some operational difficulties, detailed planning to ensure changes are thoroughly examined prior to being implemented will be key.
Finally, TOCs can incentivise customers to spread demand for services across the working day by making it more attractive to travel during non-peak periods. This could be achieved by dramatically lowering prices during off peak hours or by enhancing the passenger experience by installing more tables, plug sockets and improved access to Wi-Fi on all trains. Although a great idea in principle, there are likely to be challenges. For example, as TOCs do not own the trains directly, it’s not immediately clear who would pay for the required carriage improvements and upgrades.
It is unlikely that any one of the above suggestions will improve seat utilisation and make train services more profitable. What may work in one area is not necessarily right for another and regional idiosyncrasies will have to be accommodated. With GBR set to take ownerships of the TOCs profits and loss in the near future now could be the perfect time for TOCs to experiment and re-think the way that train services operate.
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Here are some of our findings from a recent survey around a lack of sector alignment and incentivisation to deliver change in the rail industry.