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Author Topic: Fares ... and how much should TOCs and RoSCos be receiving to support them?  (Read 610 times)
grahame
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« on: November 10, 2020, 08:03:21 am »

How much remuneration should the train operating companies (TOCs) and rolling stock leasing companies (RoSCos) receive for their services during the current extraordinary times, and in particular should there be a slice, and if so, how much and on what terms, to provide incentives of profit for their shareholders and bonus for their directors?  Having taken on the commercial risks of a franchise or of owning trains that are not required (at present) in such a quantity as they have, should they have been allowed to fail, forced unwillingly to carry on at near-zero (perhaps loss in the short term) under their contracts, given a deal under which the cover costs plus keep their system (in which ahareholders are often pension funds paying - well - for your and my retirement), or be given a more generous deal in which the government provides for things as they were before Coronavirus, rather like some sort of insurance cover exepct that - to my knoweledge - no-one in the business was insured against the business effects of pandemic?

The question is a far from obvious one. A profit amount equivalent of (say) 2% on collected fares when the farebox income is 80% of the business income would become a profit level of 16% on collected fares if fares fell by a factor of 8 to just 10% of the (previous) business income, and such numbers lead to a new-look financial model in which all sorts of questions can be raised and accountancy games played, with varying degrees of merit.  For sure, the effect on income / operating costs on income of a fare rise next January will be far, far less this year than most - but then it "needs to happen" if the long term income stream policy is to ramp up the 80% farebox income to a higher percentage, reducing government subsidy in the process.

I was triggered to raise the question by a press release from the RMT yesterday where they reveal that "New research from RMT reveals that the private rail companies in Scotland set to make over GBP28 million in profit under Covid-19 Emergency Agreements, equivalent to up to a 7.4% fares cut".  I am not an accountant, so I'm not convinced of the validity of comparing the relative proportions of profit / management fees which are based on pre-Covid operating costs (as I undertsnad it) to the current farebox income which is an order of magnitude down on what it was this time last year.  The RMT are certainly correct in identifying (if indeed they did identify) that a significant / radical changes in fare income at the present time would have far, far less of an effect on the industry's overall financial position and so carry a far lower risk to actually change under EMA, ERMA, or ETC into the future than it would have had if implemented in January 2018 (when it was needed), January 2019 (when it should have been done) or even January 2020 (by which time it felt long overdue).
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« Reply #1 on: November 10, 2020, 02:08:08 pm »

I read yesterday - unsure if it's correct, mind - that XC are on a 0.5% payment for running their direct award - most other operators are now on 1.5% (down from 2%)

That's a minimal return in my view and only by making trains operate under last resort ter,s might any money be further saved.
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Robin Summerhill
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« Reply #2 on: November 10, 2020, 08:39:05 pm »



I was triggered to raise the question by a press release from the RMT yesterday where they reveal that "New research from RMT reveals that the private rail companies in Scotland set to make over GBP28 million in profit under Covid-19 Emergency Agreements, equivalent to up to a 7.4% fares cut".  I am not an accountant, so I'm not convinced of the validity of comparing the relative proportions of profit / management fees which are based on pre-Covid operating costs (as I undertsnad it) to the current farebox income which is an order of magnitude down on what it was this time last year.  The RMT are certainly correct in identifying (if indeed they did identify) that a significant / radical changes in fare income at the present time would have far, far less of an effect on the industry's overall financial position and so carry a far lower risk to actually change under EMA, ERMA, or ETC into the future than it would have had if implemented in January 2018 (when it was needed), January 2019 (when it should have been done) or even January 2020 (by which time it felt long overdue).

Quite. I am not known for union bashing like some on this forum and elsewhere, but anything the RMT puts out (or TOC management for that matter) needs taking with a very large pinch of salt.

I have not seen the accounts (and Im not really interested enough to look it up) but a more balanced view would be to show how that 28m figure is made up and what it represents. Is it a gross figure from which expenses (which may be substantial if they include such things as track access charges etc) would be deducted, or is a net figure? If it is a net figure, what percentage of normal turnover would it represent? On its own the figure is meaningless.

To link it to fares in the way it does is disingenuous at best So it is equivalent to up to a 7.4% fares cut is it? In that case, so would reducing Scotrails wage bill by the same amount, but I cant see the RMT shouting that from the rooftops in a press release...
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