What is Affecting Season Ticket Elasticities in London?

What is Affecting Season Ticket Elasticities in London?


A Meaney, M Shepherd, Oxera Consulting Ltd, UK


Recent analysis in the GB rail market by Oxera indicated that season tickets in London are more elastic than previously thought. If true, this finding has important commercial and policy implications. This paper will discuss possible reasons.


Season tickets in large urban areas such as London are typically thought to be fairly inelastic - ie, the demand for travel using these tickets does not respond greatly to changes in price. However, recent work by Oxera, for both the UK Department for Transport and a number of Train Operating Companies, has suggested that this is not necessarily the case. If season tickets are more elastic than conventionally thought, this has important implications for both commercial and policy decisions.

The reason why season ticket elasticities are thought to be relatively low is that there are few alternatives - anyone who has tried travelling into central London by car knows just how difficult (and expensive) an option this is. The perceived wisdom is therefore that passengers travelling on season tickets do not change travel patterns in response to price changes. In other words, there is a "captive market" of consumers who need to be protected by, among other things, fares regulation.

However, with the increasing flexibility of working patterns for large segments of the population and the availability of new travel products such as smartcards (eg, the London Oyster card), these patterns may be changing. Those who would have used a season ticket to commute to work four or five days a week at fixed times may be changing to a more flexible approach of using a full-fare ticket to travel to work two or three days a week, working from home, and attending meetings outside of the office on some days. As the economy of London becomes increasingly focused on professional services and technology companies, the scope for flexible working is likely to continue to grow.

The higher-than-expected season ticket elasticities may therefore reflect a larger diversion rate between season and full-price tickets, or between season tickets and smartcard products, than has been true historically.

Our paper will present the results of further investigation into this important issue, considering both theoretical and empirical explanations for the finding. Whether season tickets are price-elastic is an important topic with profound implications for commercial and fares policy in London. However, this finding is of wider importance because, as economies across Europe change, other cities are likely to experience similar effects. Our paper will aim to stimulate debate and provide policy recommendations based on the most up-to-date evidence available.


Association for European Transport