Home Estate Planning Lumo chief: More commercial freedom will bring down rail fares

Lumo chief: More commercial freedom will bring down rail fares

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Bringing more commercial freedom to the UK’s rail system will help bring down fares for passengers, the boss of Lumo and Hull trains has argued.

Operator’s Lumo and Hull are one of a select few open-access train companies in the UK. The model means the companies take on full commercial risk while not being subject to hefty franchising fees.

In an interview with City A.M., Martijn Gilbert said: “People are switching to us and that’s contributed to growth in the market and the open access rail model, you know, be it at Lumo, be it what our sister business has done at Hull trains.

“Every time they’ve been introduced into the market, they have helped unlock better value fares for customers.”

Post-privatisation, open access was brought in to provide mainstay train operating companies with extra competition.

But it is still rare in the UK, with Grand Central, Eurostar, Heathrow Express and Hull and Lumo the only operators using the model. Many open-access providers were also crippled in the wake of the pandemic, with no government bail-outs available to them.

“The first thing is… it is no cost to the taxpayer. So there are these entrepreneurial commercial organisations that are taking the full risk,” Gilbert told City A.M.

“But in return, that drives the fact that we are only successful if we carry people on our trains…. That, in turn enables us to offer cheaper fares to customers, which has the benefit of keeping fares low.”

Gilbert described a “halo effect” in which other operators on the route are kept “sharp, if you like,” due to the extra fare competition.

That drives innovation and keeps others on the route focused, he added, while all “at no cost to the taxpayer.”

His comments come after Lumo, which is owned by FirstGroup, proposed a new rail service between Glasgow and London on Wednesday. Discussions are in the works between FirstGroup, Transport Scotland, and Network Rail.

“It’s just making the trips even, you know, achievable. I mean, we’ll hear anecdotal stories of people saying I wanted to go to London to watch football or whatever, or to go to a concert.

“But actually, you know, I was priced out, couldn’t afford to do it, and then they can find a £40 Lumo fare and actually that trip becomes a possibility.”

Nonetheless, there is still a long way to go if open access is to be rolled out in any significant way across British rail. Operators like Lumo must pass tests to prove their services won’t just take away from customers from the major companies.

Labour is proposing to nationalise the railways, while there are still questions over how Conservative plans for a state-owned overseeing body, known as Great British Rail, could play out.

The government published its draft rail reform bill last week, which included details of GBR, a project that would constitute the biggest shake-up of the rail system in decades.

Gilbert told City A.M. he was “pleased to see references to open access in the draft rail reform bill that came in last week.”

“We want to do more of this style of operation, we’ve got an application at the moment to run from London to Sheffield via Reckford and a lot of support from those communities there. And, you know, we absolutely think that there should be more of this.”

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