Recent UK rail problems bring into focus how the sector is competing with air for domestic business travel
STRIKES, DELAYS, FARE INCREASES AND STALLED INFRASTRUCTURE UPGRADES undermined the image of rail travel over this winter, and on routes where airlines do compete there are signs of renewed competition. Could many business travellers switch back to air or get back in their cars, despite the carbon saving agenda?
It’s a very real possibility on some routes, while train operating companies promise ‘jam tomorrow’. But there is real substance in their promises on two major business routes, as Great Western services from London to the West Country and South Wales are being electrified, and new trains are also introduced on the East Coast route from London to Leeds, Newcastle and Scotland.
Evolvi’s business continues to grow. In 2016, the online booking platform saw an increase in transactions to just under 8.2m from over 7.8m in 2015, while average ticket values reduced from £58.87 to £57.20, proving that you can beat fares increases by advance purchasing.
Although airlines compete with rail on shorter routes, such as Manchester and Leeds/Bradford to London, they appeal mainly to interline passengers. The main battleground is on longer routes including Edinburgh, Glasgow and Newcastle to London, and here there are interesting developments.
Flybe starts flying Edinburgh-Heathrow from March 26, and a key factor in this is Heathrow’s decision to cut landing charges for domestic passengers by £10 to £19.10 a head. Although frequency and flying time are inferior to British Airways, at least it’s competition for the first time since the Virgin Little Red service ended. Flybe will also serve Aberdeen from Heathrow, but rail can’t compete over that distance.
LONG DISTANCE COMPETITION
Despite this, Virgin Trains East Coast is targeting a 50 per cent share of Edinburgh- London traffic (measured against airlines) by 2023. Civil Aviation Authority figures indicate that rail currently has about 25 per cent of passengers (business and leisure) between the two capitals and over 20 per cent of the smaller Glasgow and Newcastle markets, whereas on Manchester-London it has 90 per cent. The key to Virgin’s optimism is a fleet of new Azuma trains starting delivery in December 2018, which will mean a reduction of around half an hour to four hours for the fastest Edinburgh-London services, operating every hour.
Rail passengers between the two cities increased by 8.2 per cent from January- September 2016, following introduction of a 30-minute frequency for much of the day. David Horne, Virgin Trains’ managing director on the east coast route, says: “The improvements we’ve made have been popular with customers, who are voting with their feet. That’s good news for passengers, good news for the environment and good for the long-term growth of rail between Scotland and England.”
A four-hour journey time from city-centre to city-centre is bound to attract more business travellers, especially if wifi is reliable and they have space to work. The same type of new trains, built in the UK by Hitachi, will start on Great Western routes this year, where there is no air competition unless you consider Newquay-London. But here the news isn’t so good, with indefinite delays in completing electrification to Bristol and Oxford, meaning the new bi-mode trains will run on diesel power at a slower speed for some of their journeys.
IMPROVEMENTS NEEDED NOW
But whatever the future promises, are improvements needed now to the tarnished image of business travel by rail? Many commentators believe so, with mobile ticketing and more reliable wifi/mobile networks being top of the wish list.
HRG managing director for Europe, Ian Windsor, says: “Our UK rail business is ticking over nicely, but the misery on some commuter routes has to affect its image , especially if your own staff are involved. Any improvement in the frequency of domestic air routes or lowering of fares is bound to attract some rail passengers. Time is of the essence, no two ways about it. But a four-hour journey time from London to Edinburgh makes rail a viable option.
“Improvements to the rail infrastructure can’t come soon enough, because we need to catch up on the under-achievement of the last 20 years. Major projects such as Crossrail in London won’t change everything suddenly, and people want improvements tomorrow.”
Windsor feels the carbon saving agenda has reached a plateau, adding: “As a plc we have to report on carbon savings annually, but this is not key for many companies. It’s not as high up the agenda as it used to be.”
Andrew Dalton, global programme manager at Carlson Wagonlit Travel, adds: “We are now seeing the benefits of much-needed rail infrastructure improvements like Crossrail and the Northern Hub electrification programme, but equally as important is the experience on the day. Being able to arrive at the station, see the service is on time, a seat is available, and onboard facilities working are all important factors.
“We all expect connectivity, with many city centres now having free wifi and a growing number of airports allowing travellers to stay connected on the move. Unfortunately, our rail network still lags behind both onboard and in stations.”
GOVERNMENT INVESTMENT
PWC travel buyer Will Hasler is chairman of the ITM Industry Affairs Group. He says: “Domestic air capacity isn’t increasing as Flybe has taken the old Virgin Little Red slots to Heathrow, but it is imperative that HS2 is connected to Heathrow in the longer term so we can begin to attempt an integrated transport system as on the continent.
“The trans-Pennine route needs investment now – not just in HS3 which is years away and not even guaranteed – this having been promised and then shelved. The Great Western electric upgrade is happening, but running very late. Ideally, there should be more investment in the railways from central government so that travellers, commuters and business travellers are not just subsidising the investment.”
Hasler adds that company travel policy and the individual traveller’s wishes are often in conflict, with the traveller often wanting first class travel with the flexibility of anytime fares. “Some train operators have it right by pricing a first class advance fare cheaper than an anytime single on the busiest peak hour trains,” he says.
Mirja Sickel, head of sales and marketing at Amadeus Rail and Ground Travel, calls for more integration with other forms of transport: “Business travellers will be looking for simplicity when booking a rail trip, but also ticket flexibility should they encounter unforeseen delays,” she says. “Rail operators need to offer the possibility to rebook a ticket online, in real-time and in an automated way.”
Ken Cameron, Evolvi’s managing director, says the increase in fuel prices, affecting car travel, is one of the factors driving the continued growth of rail travel.
“There is nothing on the horizon to suggest that this situation is likely to change over the short- to medium-term, despite attempts to make domestic air travel more competitive. Investment by train operating companies on longer routes, notably around ease of use, wifi, catering and the opportunity to work, is enhancing productivity levels across the total journey time.
“The arrival of the next generation of rolling stock – together with infrastructure investment – will go some way to meeting the needs of consumers. Business travellers accept that things can go wrong operationally on a busy rail network, but what’s needed when they do is good communication.” Improvements to mobile phone ticketing are also keenly awaited.
NEED FOR MORE COMPETITION
The GTMC continues to lobby for more competition by open-access train operators, currently limited to Grand Central and Hull Trains on the East Coast route.
GTMC chief executive Paul Wait says: “Because there is little open access and therefore limited competition on the rail network, it is difficult for rail travellers to vote with their feet. From our own research we know that business travellers’ main criteria focus is on cost, connectivity and the ability to be productive – it is these three areas that require focus, investment and improvement.
“Inter-city journeys have competed alongside domestic air routes for some time and tend to serve different customer requirements,” he says. “For rail operators to compete effectively against reduced air fares on domestic routes from Heathrow, due diligence must be paid to an increase in connectivity and the UK rail network infrastructure. Any increases in connectivity should have a strategic focus on poorly served destinations.”
One of very few routes where there is genuine rail competition is between Birmingham and London, although Virgin Trains and Chiltern use different routes and different stations in each city.
Phil Youster is travel manager of legal firm Gowling WLG, which is a major user of these routes. He says his travellers favour Chiltern’s Business Zone – available at a much lower price than Virgin first class.
But he adds: “We could switch quite a lot more business to Chiltern if Business Zone trains had more frequency. It’s a pleasanter way to travel even if the journey is a little longer, and wifi is superior to Virgin’s.
“The biggest problem on the rail network is getting information when something goes wrong. Time is very pressing for our lawyers, so they are looking forward to faster journey times with HS2, but I dread to think how high fares will be and what kind of service will run along existing routes
Edinburgh-London: air or rail?
MOST TRAINS TAKE AT LEAST 4 HOURS 30 MINUTES on this route, meaning air travel is faster even allowing for the loss in productivity with a disjointed journey to, through and from the airports. But a four-hour rail journey will operate hourly starting in December 2018.
Rail fares may have to come down to be competitive, however, as this snapshot shows. We researched rail and air fares at the end of January, for travel two weeks later, outbound from Edinburgh on a Monday morning arriving by 1100, departing on a Wednesday afternoon before 1800.
VIRGIN TRAINS EAST COAST
There was good availability of advance standard class fares for £136 return, or £123 returning at 1800. The flexible return fare of £221.50 was not available for return travel until 1800.
First class advance fares started from lower than this - £201 – but the fully flexible first class return fare was £372.
A Scottish Executive package is available at £229 return, with complimentary upgrade to first class ‘subject to availability’, but this is not shown on the normal fares search.
BRITISH AIRWAYS
Heathrow: From £199 return.
Gatwick: From £97 return.
London City: From £144 return.
(All fares are basic, non-flexible with no checked luggage).
FLYBE
London City: From £249.98 return.
(The Heathrow route starts on March 26).
EASYJET
Gatwick: From £58.98 return.
Luton: From £55.98 return.
Stansted: From £52.98 return.
RYANAIR
Stansted: From £38.18 return.
EUROSTAR HAS YET TO CONFIRM A START DATE for direct services from London St Pancras to Amsterdam, but this is expected to be by the end of this year. A journey time of under four hours is promised with stops in Brussels, Antwerp, Rotterdam and Schiphol airport.
Services will be operated by a new fleet of e320 trains, 320km/ph (200mph) being their top speed. The new trains are already operating most services on the London- Paris route and come equipped with wifi, which was not offered on the e300 trains first introduced in 1994. Two refurbished e300 trains with wifi are now in service, but roll-out has been slow.
Amsterdam will give Eurostar a much needed boost after falling passenger numbers and revenues, blamed on uncertainty following terrorist attacks in Europe. Passenger numbers in the third quarter of 2016 were down 10 per cent year-on-year to 2.6m, with sales revenues down 8 per cent to £184m.
The London-Amsterdam air market carries three million passengers a year, and HRG’s Ian Windsor expects Eurostar to do well. “Eurostar has struggled due to the lack of wifi, but if you can spend four hours on the train working and travel between city centres then that will attract business travellers,” he says.
“In Europe, trains are integrated more into people’s day-to-day lives than over here. No-one would dream about driving from Antwerp to Brussels, for example.”