The Privatisation of Passenger Rail Services in Britain: an Assessment of the Impacts of On-the-track Competition



The Privatisation of Passenger Rail Services in Britain: an Assessment of the Impacts of On-the-track Competition

Authors

WHELAN G, PRESTON J, WARDMAN M and NASH C, University of Leeds, UK

Description

The background to the research reported here is the reorganisation and privatisation of passenger rail services in Great Britain. This process, enacted by the 1993 Railways Act, has been extraordinarily complex. For the passenger business of the British R

Abstract

The background to the research reported here is the reorganisation and privatisation of passenger rail services in Great Britain. This process, enacted by the 1993 Railways Act, has been extraordinarily complex. For the passenger business of the British Railways Board, the Act led to the vertical separation of operations from infrastructure, the horizontal separation of passenger railway services into 25 train operation units, the franchising of these train operating units and the eventual lifting of entry controls; the main objective being to foster competition in the supply of rail services. While the issue of competition for the market through the franchising process is the subject of other papers by the research team (see for example Preston and Whelan 1995) it is the issue of competition in the market through open access operations that is of interest here.

The possibility of open access competition has stimulated a considerable amount of discussion. In our work on franchising (ibid), we found opinions amongst our sample of 38 key decision-makers to be mixed with regard to open access. In the main, they believed that on-track competition would he restricted to areas that are very profitable and areas where parallel routes exist but they predicted that in time the industry would become more competitive as regulation is relaxed. Indeed, as it now stands, open access competition has been limited by the Rail Regulator to routes accounting for less than 0.2% of a train operating company's revenue or on which no through service is operated, his intention being that this should rise to 20% in 1999 and be completely lifted in 2002 (OPRAF, 1996). Other respondents took the view, however, that there would never be open access competition and saw the issue as a "red herring". They believed that privatisation would simply serve to replace a public sector monopoly with several monopoly franchises; some with the potential to earn super-normal profits (This is a sirnilnr view point to that of Save our Railways, 1997).

If on-track competition does arise, rail operators are likely to take pre-emptive action to deter new entrants and compete fiercely where entry occurs. Among the competitive strategies likely to be adopted are: improved service frequency, fare reduction, greater customer care and on-board facilities, improved brand loyalty and restricted access to common ticketing arrangements. It is the aim of this paper to explore the implications that these strategies will have for the profitability of operators and the economic welfare of society. To this end we have developed an econometric rail operations model and evaluator to assess the likely outcomes of various forms of competition. The model is applied to a principal inter city rail route in Great Britain and is based on real demand and cost information.

In the following section we present an outline of the case study, describe the data collection exercise and explain the structure of the operations model and evaluator. In Section 3 we define a set of plausible competitive scenarios and show their simulated outcomes. The results are shown in terms of changes in overall economic welthre together with a disaggregation of the principal gains and losses. Finally, we draw some conclusions and make some suggestions for further research in Section 4.

Publisher

Association for European Transport