TRENDS IN FARES DEVELOPMENT

Alain FlauschSecretary GeneralInternational Association of Public Transport

Moscow Transport Council 2nd October 2015

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MAKE THE SYSTEM EFFECTIVE, EASY TO USE AND SUSTAINABLE

Legal framework for Public Transport Operator in Moscow (e.g. Quality standards)

Extending the quantity of BUS LANES Priority for Public transport Enforcing the parking policy Optimizing the network design (straightening and expressifying) Enhancing transfer hubs Link with land use Safeguard future transport corridors Further developing the smart ticketing system (mobile phone) Developing an integrated rate card system with increasing role for season tickets Developing a rate card by zone Regular fare adjustments to cover increasing operating costs Developing an extensive passenger information system Making the system clean with a low CO² footprint (Gas, E-mobility, Hybrid) Developing the existing clean transport systems (Trolleybus, LRT) Developing a congestion charge system Developing the pedestrian zones and bike routes Developing parking and ride facilities The right mode of transport at the right place

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FOCUSING ON REVENUES

Enforcing a parking policyDeveloping a congestion charge systemLinks with Land useDevelopment of smart ticketing systemsPromote an integrated rate card systemDeveloping a rate card by zoneRegular Fare Adjustment

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FUNDING BREAKDOWN

OperationsFare revenue

Investment

Commercial revenues

Expenditure

Funding

General budget

Earmarked charges ?

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WHAT IS RESILIENCE?

There is no silver bullet, in a context of constrained available public funding, it is required:

Cost effective service delivery Fares which reflect the quality expected by customers Development of other commercial revenue Creation of earmarking funding sources from indirect

beneficiaries

Ensuring a financially sound system enabling the longevity of the system and its capacity to resist to external shocks.

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FAREBOX DOES NOT COVER OPEX

Am = American (North/South)

Eu = European

As = Asian

0.0

0.5

1.0

1.5

2.0

2.5

As As AsAm As

Am Am AsAm Eu As

Am Eu Eu Eu Eu Am Eu Eu As Eu Am Eu Eu Am As Eu

Non-Fare Commercial RevenueFare Revenue

Cost Coverage - Revenue /Total Operating Cost (2009)

Source: Imperial College London

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WORD OF CAUTION

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FARES TRENDS

1. Regions showcase different priorities in the definition of fares (social/environmental vs commercial)

2. Evolution of fares levels/structure show a preference for ease for to customers

1. Seamless travel2. Integrated fares

3. Introduction of smart card mostly for customer care

4. However, some regions have implemented more sophisticated fare structures

5. Pricing is also used as a tool for demand management, especially for peak management

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OPTIMISING FARE REVENUES

Main challenge: reconciling different objectives of authorities, operators and customers

Better quality and higher fares more customers

Fare regulation and adjustments are deemed desirable:

1. Generating sufficient margins 2. Transparent and dependable income

EMTA assesses that the fare revenues coverage in Europe of OPEX is on average 47%.

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FARE REGULATION

A sound fare policy should consider the position of all relevant stakeholders.

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Timing of review

Governance

Adjustment mechanism

Success factors

Good practice case: Germany

Operators involved in decision making process

Annual review (optional)

Inflation + 1%

Outcome (Germany): increased revenue per passenger, increased number of passengers, significant improvement of cost coverage rate, higher margin of manœuvre for service improvement.

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FARE FORMULA

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FARE STRUCTURE: NAVIGO PASS

Fare integration project: Navigo Pass(Sept 2015)

1. Seasonal ticket: 70EUR per month Increase of +3% of single tickets

2. Target: 3,8m commuters. 3. Dezoning of 1-5 (excluding 6 and

7)

Objective: increase ridership through seasonal ticket (annual, monthly and yearly), it is estimated that there will be 400m less in fare revenues.

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MAXIMISING FARES MTR HK

Fare Revenue Strategy designed to maximise revenue from differentiated customers with varying price elasticity.

Fare structure: distance based (mostly)

Development of tailored tickets targeting:1. Long distance commuters: up to 5

seasonal passes2. Medium distance: City saver ticket3. Short Distance passengers

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REVENUE MANAGEMENT

Providing the right service to the right customer at the right time (price discrimination, market segmentation)

Common in many sectors/industrues Potential cost reduction and revenue increase Facilitated by automated fare collections

Possibilities for transport: time of day pricing, distance based pricing, premium services, loyalty schemes, etc…

Tensions between Revenue Management and Fare Integration

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SOLIDARITY PRICING IN GRENOBLE

Concessionary fares set till 2009 provided prices discount established within a specific framework (tot 52,000 free or quasi free).

The new approach aimed to: 1. Redefine the socio-economic realities of the

agglomeration 2. Include new categories (job seekers, young workers,

etc)3. Improve targeting of concessionary fares

Outcome: 33,000 users pay more thorugh increased fare, enabling 60,000 users to benefits from solidarity pricing

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FREE PUBLIC TRANSPORT

Tallinn is the largest experiment with FREE public transport

Outcomes: 1. Passenger demand rose by

3% with only 1.2% in passenger demand the rest was dependent of quality/capacity increases

2. Higher levels of inhabitants registration as Tallinn residents

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LOYALTY PROGRAMES

Hong Kong’s MTR launched MTR Club Registration using Octopus Card Over 1.1 million members Members accumulate points by ride or shop

for exclusive gifts redemption Assessment:

• Club members spend 1.8 times more than non club members

• Club members exhibit 5.5% increase in spending per day over first year of use

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MARKETING PROGRAMMES

Welcome Kit sent by Munich (Germany)

Mobility organiser: overview about the most relevant information and offers in terms of transport and mobility in the city of Munich.

Service card to order a test ticket for public transport and further information free of charge:

- MVG city map- Map of all PT lines- Tariff and special offers- Bike map- Munich by foot (cultural/historical paths)

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CONCLUSION

1. Fares should reflect the quality expected by customers

2. Fares require to be adjusted on a timely basis3. Smart cards and e-ticketing should be used as

tools to implement a sustainable fare lelve, while retaining its social component,

4. Building a relationship with passengers to foster loyalty via special schemes, marketing or communication campaigns,