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  1. Spotlight
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27 September 2022

Why competition is the key to customer satisfaction

On the railways, our current model is in need of reform, but choice is still essential in driving better services.

By Jody Ford

The past few months have not been the easiest in the long and proud history of the railways in the UK. From strike action and timetable alterations to extreme weather, too many passenger journeys have been far from the routine and dependable experience that rail is designed to deliver. Many travellers are looking for things to change.

Looking across the UK rail industry, overall passenger numbers are starting to look healthier again, reaching 95 per cent of pre-Covid levels. But clear challenges remain, with overall revenue still down and commuting now a discretionary decision for large sections of the workforce. The railway has its work cut out to retain and regrow its customer base.

The good news for both passengers and taxpayers is that there can be a positive future ahead for the railway industry. We just need to look towards the continent for inspiration.

In June I travelled between Barcelona and Madrid on one of Spain’s high-speed rail lines. At nearly 400 miles it is broadly equivalent to travelling from London to Aberdeen, but the rapid 2-hour, 30-minute journey time is faster than travelling London-Newcastle.

The speed of the journey was not the fascinating part of my experience, however. Instead, what struck me was the sheer level of choice I was offered as a customer. On one leg of my journey I travelled on the AVE high-speed train service, operated by Spain’s national carrier Renfe. On the other leg I chose to use Ouigo, a low-cost carrier operated by France’s SNCF – their trains are more infrequent, but cheaper, and the timings suited me better.

I could have chosen a third operator – Avlo, a no-frills service that Renfe has introduced in reaction to the competition it faced from its French counterparts. And now this weekend a fourth operator has entered the mix: Iryo, backed by the Italian state railway Trenitalia.

This proliferation of choice has been a relatively new event, as it’s only 18 months since Ouigo launched in Spain in a bid to shake up the market. And it certainly has succeeded there: we’ve seen transactions on this route grow while the average ticket price paid has reduced by 49 per cent compared with pre-pandemic, according to Trainline analysis – a huge win for travellers.

This is what will attract people out of their cars or away from the airports and back onboard trains.

And it’s not an isolated example – seven of the ten busiest rail routes in Europe have competition between operators (noticeably the UK’s sole domestic route on that top ten list, London-Manchester, is one of the exceptions).

In France, Trenitalia are again the challengers in the market, starting a new service on the Paris-Lyon route last December to rival the two different brands operated by SNCF, the famous TGV and its Ouigo service. Nine months later, again we’ve seen demand grow and prices fall, with tickets available for up to €43 less.

Within Italy, the boot has been on the other foot for Trenitalia as it has itself faced competition from rival operator Italo since 2008 – perhaps giving it plenty of time to assess and realise the benefits of a competitive environment.

For example, Rome-Milan is Europe’s third-busiest rail route; according to Cesisp (Italy’s Research Centre in Economics and Regulation of Services, Industry, and the Public Sector), following the start of competition the number of passengers doubled while the average price was reduced by 40 per cent. And crucially, rail attracted travellers away from planes or out of their cars: in a decade the modal share of rail between Rome and Milan increased from 36 per cent to 75 per cent, while aviation’s share fell from 50 per cent to 17 per cent, and road users reduced to less than 10 per cent.

More passengers travelling by rail, and paying less for their journey, while emissions reduce because fewer people are flying or taking the car – in a cost-of-living crisis, that’s the definition of a win-win scenario.

In contrast, in the UK, competition so far has been mostly limited to big businesses bidding for contracts in the much-maligned franchise system. Too often this showed private sector involvement in the railways at its worst, with competition reduced to an auction process that encouraged financial over-bidding but neglected customer experience. It’s no wonder it proved so unpopular with passengers.

The notable exception to this lack of competition is on the East Coast Main Line, where the likes of Hull Trains, Grand Central and Lumo each seek to exert a degree of pressure on the franchise-holder, LNER. And as a result, we’re seeing a similar trend to the continent, with increased competition delivering clear results, and LNER generally recognised as one of the strongest performing train operators in the country.

There have been successes that the rail industry can celebrate – the number of people travelling by rail doubled between privatisation in the mid-1990s and the start of the coronavirus pandemic. The network has a safety record that it can be proud of, and there has been substantial investment in creating extra capacity, rolling out modern train fleets in most parts of the country, and transforming major stations into world-class destinations like Kings Cross St Pancras, London Bridge and Birmingham New Street.

But still, UK travellers are crying out for rail to be a more reliable, attractive option, because they are ready to contemplate changing their travel behaviour. Petrol prices have soared, our airports are in a semi-permanent state of chaos, and people are far more aware of the environmental impact of their travel than ever before.

So what needs to happen now, if we’re going to make rail an attractive choice again for travellers who are reassessing their priorities during the cost-of-living crisis?

Firstly, the industrial dispute needs to be settled, so that passengers can trust the railway timetable again when they book their journeys. This can and will be done, around the negotiating table and out of the glare of the media spotlight, because it is in the interests of both railway staff and their bosses.

Beyond that, there is much focus at the moment on the structure of the industry. Great British Railways (GBR) is due to have legal powers in little over a year, de-politicising the rail industry and ending a period of stasis in strategic decision-making that was sparked by the pandemic.

Once operational, GBR’s priority must be to create an ecosystem in which multiple operators and private sector innovation can thrive – offering passengers the range of value, choice and experience their continental counterparts are already enjoying.

A flourishing, low-carbon transport system, powering leisure journeys and business travel, spreading economic benefits across the country, and one that is easy to book and reliable.

And you don’t have to travel to Spain to enjoy it.