FARES IN THE PUBLIC TRANSPORT SECTOR
Mohamed Mezghani
Deputy Secretary General 7th July 2017
Bari (Italy)
Funding breakdown
Operations
Fare revenue Investment
Commercial revenues
Expenditure Funding
General budget
Earmarked charges
?
Higher demand,
?
Better quality of service Renewal/new infrastructure Enhanced accessibility
Quality requirements
Tight public finances
Lower fares and/or
Lack of optimisation of fare revenues
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.
For a resilient approach to funding
Trends in fares
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 to customers
a) Seamless travel b) 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
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%.
Fare Regulation
A sound fare policy should consider the position of all relevant stakeholders.
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.
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
Using levers: Revenue management
Hong Kong: 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 passes
2. Medium distance: City saver ticket 3. Short Distance passengers
Maximising Fares
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
Solidarity pricing
Free Public Transport
Tallinn: 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
Munich: Welcome kit sent to new residents giving an 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:
