The problem of homogeneity of rail passenger delay compensation scheme rules in Great Britain: impacts on passenger engagement and operator revenues

Abstract

A rail passenger delay compensation scheme aiming at improving attractiveness of rail services and providing minimum customer service standards for delayed passengers operates in the European Union and Great Britain. British rail passengers are eligible to claim 50% of fare for delays of more than 30 min and 100% for delays of over 1 h. The scheme rules were chosen arbitrarily and are homogeneous across all ticket types and journey lengths. As longer journeys are usually more expensive and subjected to longer delays, long distance operators are likely to see more passengers being eligible to claim compensation. This, combined with higher engagement rates due to differences in sensitivity to lateness or opportunity cost of not claiming compensation is likely to have an impact on the differing revenue burden for operating companies. Against this background, this study aims to quantify the revenue impact of homogeneity of scheme rules for different types of train operators to advance understanding of the scheme’s costs and motivate further research into the economic rationale behind the scheme’s provision and design. An econometric model was constructed to empirically test the impact of performance levels and train operator characteristics on the compensation payments made to passengers through the ’Delay Repay’ scheme in Great Britain. The combined differences in the nature of operation and engagement levels mean that with delay levels and engagement increasing with journey length and fare, short, medium and long distance train operating companies (TOCs) repay on average respectively 0.3%, 0.8% and 1.8% of their ticket revenues, increasing the scheme’s proportionate burden on the revenues of long distance operators. Further research is needed to either explain the economic or regulatory reasons behind the differing revenue impact of the scheme on different types of TOCs or suggest how the scheme can be redesigned to take these differences into account.