ATOC report: UK Passenger Growth Helps Drive Big Rise In Money To Reinvest In Rail Services

2013-07-12 — /travelprnews.com/ — Train operators are generating more than four times as much money for Government to reinvest in rail services than 15 years earlier.

This is a key finding from Growth and Prosperity, a new report published today by the Association of Train Operating Companies (ATOC) and based on data analysed and collated by KPMG.

By significantly growing passenger revenue while containing the costs they can control, train operators have increased the money they generate for Government to reinvest from £400 million in 1997-98 to £1.7 billion in 2011-12.

This money is helping to reduce public subsidies and sustain the biggest investment programme in rail in decades. At the same time, the operating margins of train companies have remained modest, most recently on average around 3% of turnover.

The key factor driving the £3.2 billion increase in passenger revenue, which is helping to generate the money from train operations for Government, has been the phenomenal rise in passenger journeys. 96% of the increase in revenue has come from passenger journey growth, as opposed to 4% from fare changes.

The data collated shows that, while rail prices and motoring costs have broadly mirrored each other, passenger growth in Britain has outstripped other external demand factors and other major European railways.

Since 1997-98:

·         Rail journeys have grown at a rate twice as fast as the growth in GDP. In the previous 15 years, journey growth was around half that of GDP growth

·         Journeys per head of population have risen significantly from 14.9 in 1997-98 to 22.4 in 2011-11

·         UK journey growth has been bigger than in France, Germany and the Netherlands

Franchising, along with Network Rail’s sustained efforts to improve performance and successive Governments’ increased investment, has played an important role in encouraging greater rail use by providing passengers with better services and value. On a railway effectively the same size as 15 years ago, there are now 4,000 more services a day – a 20% increase. In addition, 500 million more journeys a year are now rated ‘good’ or ‘satisfactory’ by Passenger Focus, the independent watchdog.

Despite UK Government policy since 2004 favouring above-inflation increases in Season tickets, the average price paid by passengers for each mile they travel has only increased

from 19.6p to 20.4p in 2012 prices over that period, because more passengers are taking advantage of discounted rail travel offered by train companies.

Michael Roberts, Chief Executive of ATOC, said: “The railway has been transformed in the past 20 years. Unprecedented growth in passenger journey numbers is creating a virtuous circle by generating record levels of revenue to pay for better services in turn encouraging greater rail use.

“Government commitment to significant investment in rail and competition among train companies to win and run franchises have driven improvements, as operators are incentivised to attract more passengers and contain costs. Rail franchising is a partnership between the public and private sectors that is delivering for passengers, taxpayers and the country.”

The report has the backing of the Rail Delivery Group, the leadership body for the rail industry. Tim O’Toole, CEO of FirstGroup plc and Rail Delivery Group Chairman, said: “By working in partnership with Government, Network Rail and the rest of the industry, franchised train companies will continue to strive for a bigger and better railway. This is not simply because encouraging more people to travel by rail is good for our business, but because it is vital for the future of the economy and the country.”

Sir David Higgins, Chief Executive of Network Rail and Rail Delivery Group deputy chairman, said:“There is no question that train operators have played a key role in making rail an attractive way to travel. The industry’s separation of infrastructure provider and train operator has allowed operators to focus on passenger needs and preferences, to make significant strides forward in understanding their markets and to tailor the services they offer. For Network Rail, the key issue is that we work collaboratively with all operators to deliver outstanding value for rail users and taxpayers.”

Ed Thomas, Director, KPMG Transport Advisory, KPMG, said: “The franchising model can bring beneficial effects for both taxpayers and customers. Each bid competition brings a fresh focus on the needs of customers and other stakeholders. UK rail franchises attract interest from the leading transport players from around the world. This helps to drive product innovation and sharing of best practice.”

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