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Fairer and Smarter Fares

In public transport circles there is always going to be a lot of debate over the levels of fares. Should they be higher to reduce the amount of subsidy required? Should they be lower to encourage greater ridership and/or for social equity reasons? Should it be free to eliminate the costs of collection and to truly incentivise PT use?  Through the PT benchmark study undertaken last year, we learned that Auckland’s public transport fares are relatively high – while NZTA’s farebox recovery policy seems likely to raise fares even higher in the longer term as it seeks to reach a 50% farebox recovery ratio (the proportion of operating costs paid for through fares).

The table below is from the benchmark study and highlights Auckland’s high fares on a per passenger kilometre basis: 

The extent to which we generally raise fares in the future is largely a political decision around how much we wish to subsidise public transport because of its external benefits like congestion reduction, environmental gains and support for desirable land-use outcomes. Lower fares may also raise patronage so much that the revenue loss from each individual ride is made up for through an increase in the number of riders overall – although that will largely depend on when and where those riders are added to the system and whether they require expensive additional services and/or infrastructure.

What I’m more interested in is exploring ways in which we might fiddle around with the level of our fares on a cost-neutral basis so that its structure contributes more to where we want public transport heading to. There are a few relevant matters here:

  • The extent to which longer trips should be more expensive than shorter trips
  • The level of discount we give to unlimited trip passes (daily, weekly & monthly)
  • Whether (and to what extent) we discount travel that takes place outside peak times

 

Charging more for longer trips

Starting first with comparing fares for long trips with those for shorter trips, it certainly seems as though Auckland’s fare structure starts very low and increases quite dramatically when compared to other fare structures around the world. Going by the cash fares for buses, we have a single stage costing $1.80 heading right up to 8 stages costing $10.30. In contrast, Vancouver’s base fare is $2.50 for travel with Zone 1 (including free transfers) and increases to a maximum fare of $5.00 for travel within all three zones (with a single intermediary step of $3.75 for travel within 2 zones).

In some respects, charging more for longer trips in a proportionate ways makes sense – as longer trips require more service kilometres, which comes at a cost. The rider is also gaining a greater benefit from the longer trip themselves, so there’s also likely to be a willingness to pay a higher fare. But on the other hand, there are actually some compelling reasons why we might want to reward longer trips by not charging such a high fare – after all, longer trips generate greater congestion reduction benefits while buses and trains have to complete the whole run anyway, so the extra passenger riding further doesn’t add a marginal cost (although obviously longer routes are much more expensive to run, but that might be a network design issue more than anything else).

My feeling is that, out of the three issues with our current fare structure, this is the one least likely to need significant change – but in the long run as we shift to a zone based fare system, reducing the number of zones and flattening the cost difference between shorter and longer trips, might be a smart thing to do – to help encourage those longer trips onto public transport and get them off the road.

Discounts

The second matter I think our fares need to be smarter around relates to the level of discount we give to unlimited trip passes, be they daily, weekly or monthly passes. When looking at this issue I tend to think that a fundamental decision should be made around trying to attract as many of our public transport customers as is possible to be using weekly or monthly tickets. People with such tickets will obviously try to get the best value from them, so will be regular and frequent users of PT – and they should be rewarded for doing so. Not only do they pay for their travel ‘up front’, but they are also likely to become regular users of off-peak, evening and weekend services – as those trips will effectively be ‘free’ to them (as generally people budget for a monthly pass on their weekday travel requirements).

In some parts of the city monthly unlimited passes work well but in other parts they aren’t effective at all. If we take the price of monthly rail passes in Auckland, there are two available.

  • A ‘City Monthly’ which is unlimited travel on the network between New Lynn, Onehunga and Otahuhu. This is equivalent to a 3 stage journey.
  • An ‘All Zones Monthly’ which extends that travel out to Waitakere and Papakura. This is equivalent to a 6 stage journey

The table bellows shows what the costs for each of the passes cost and the number of trips you would need to take break even for the passes vs the cash or 10 trip fare. As you can see the number of trips you would need to take if you were within a 1 stage area just wouldn’t make a monthly pass viable. By comparison if you live in a 5 stage zone like I do you need to take just 28 trips (or 14 workdays) to have been better off.

Part of the problem though is these passes are only useful for people going through town, people going from say Morningside to Henderson on a regular basis would only really be able to use cash or 10 trip fares so miss out on the benefits of monthly passes. This suggests that we need to rethink the cost and conditions of our monthly passes so that they are more useful for a greater proportion of the population. Switching to a zone-based system could mean a wider variety of monthly passes being available (a pass for 1 zone, 2 zones etc.) while generally if we are to look at anywhere in our fare system where we want to decrease the cost of fares, I think monthly passes would be the place to start. Let’s reward our best customers with a good deal.

Peak vs Off peak Pricing

Finally, we get to that vexed question of whether there should be a price differential between peak and off-peak travel. On the negative side first, it obviously adds some complexity to our fare system – at the very time we’re trying to simplify it and make public transport easier to understand. There’s also the issue of matching up this shift with a greater focus on monthly passes – as it seems unlikely most people would want their monthly pass restricted to off-peak travel only. The ability to just jump on anything, anytime, is a great attribute of having an unlimited travel pass. The other possible downside of peak pricing is that it is our peak time PT users who create the greatest congestion relief benefits for road-users, so it could come across as a bit counter-productive to charge highest fares for those people who are easing congestion the most.

But on the plus side, there is a lot of sense in having a price difference between peak and off-peak travel for a number of reasons. The most obvious is so that we can use our system more efficiently, flattening out the ‘peaks’ of demand and therefore being able to carry a lot more passengers without the need for extra buses, trains or PT infrastructure (or, more realistically, the need for proportionately less additional buses, trains or PT infrastructure). Getting an extra bus on the road at peak times, for example, is always going to be pretty expensive – because you need to be buying more buses, hiring more drivers and probably running more empty service kilometres (repositioning after that peak run).

Auckland’s PT situation, where we want to grow patronage significantly in the near future, but we don’t have the money to spend a huge amount on PT services and infrastructure (largely because of Central Government’s squeeze on funding) means that ‘flattening’ demand and getting a lot more out of our existing system is likely to be necessary. There are other ways we can do that to just ‘peak pricing’, such as providing a better quality of service throughout the day, but I think that creating a price discount for off-peak travel to reflect the lower cost of providing extra off-peak service, is something that Auckland will need to look long and hard at.

So I think we could be much smarter about public transport fares. Hopefully these issues will be looked at as Auckland Transport focuses on implementing integrated fares to go with the integrated ticketing we’ll have finished by the end of this year. Also one positive is that we haven’t actually had a fare increase for about 2 years, hopefully the huge increases in patronage in the last few years are helping to reduce the need for them.

30 comments to Fairer and Smarter Fares

  • As a 12 year bus veteran I feel I’m more than qualified to comment on the state of bus fares in Auckland.
    Firstly, amount. $200 a month feels about right in my opinion.
    Secondly, zoning, north and south zones are entirely useless and inappropriate – by far the majority of north zone bussers want to travel to the CBD or fringe, yet to do so we are required to buy a pass for the entire southern zone. Again I think $200 is completely fair but then again if its paying for a whole lot of bus I’ll never use maybe not?
    Thirdly, the notion of calendar month passes is retarded. There’s no other word for it. Why on earth should I pay for a full month service in January or December? What if I take 2 weeks holiday during the year? Unfortunately from Whangaparaoa the monthly pass is (just) cheaper than 2 weeks of cash fares, pretty darn stupid though when the system it replaced worked fine.
    Fourthly, I can’t buy my monthly bus pass on the bus on which I use that pass. Again, the system it replaced did this!

    Lastly I’d just like to point out that Vancouver metropolitan area is half the size of Auckland. The layout and spread of Auckland is undeniably more challenging.

    • Icebird

      Barney, you might be thinking just of the “City of Vancouver”, but the area covered by Vancouver’s transit system in massive, covering Vancouver itself plus (from memory) 13 or 14 satellite municipalities. I don’t have the exact figures at hand but the size of the transit area is pretty comparable. What Matt’s post didn’t make clear is that Vancouver only has 3 fare zones compared to the 6 or so stages in Auckland. So while it costs me only $1.50 to got home to Herne Bay, if I travelled a bit further to Westmere, I’d be paying $3. In comparision, all of the city of Vancouver is in one zone. The cities immediately bordering the city of Vancouver (Richmond, Burnaby, North Vancouver, North Vancouver District, West Vancouver) are in zone 2. The cities bordering *them* are in zone 3. So the lowest fare in Vancouver takes you much further than the lowest fare in Auckland. And Vancouver has its own traffic challenges, like a quite staggering number of water crossings creating bottlenecks (thanks to Burrard Inlet to the north and the Fraser River to the south).

      I’m mystified by your opposition to monthly passes. If you aren’t going to be commuting for a full month, you simply don’t buy a pass for that month. Magic! And the passes don’t necessarily have to be monthly. London allows you to buy weekly travelcards for instance. The appeal of monthly passes is that the price will be similar to what you pay for your regular commute – but any extra trips you take will essentially be free. So unlimited travel passes become an incentive to use public transport as much as you can to get value out of your pass.

      • I had an employer offer annual all zones passes as part of salary package in London. What a fantastic bonus that was. Something AT should both introduce and market directly to businesses.

        • They do that in Melbourne too, they pass the distribution cost on to companies for a discount. When all is said and done (tax breaks etc) you can get a zone 1 pass for about $750 a year, which is less than three bucks a day.

      • barney

        @Icebird admittedly from Wikipedia, but for what it’s worth, Vancouver metropolitan area: 2,878.52 km2 – Auckland metropolitan area: 5,600 km2. Incidentally, yes I have been there, several times in fact, so I am aware of it’s unique challenges, I still think Auckland is trickier – just my opinion.

        Also, as I mentioned, a monthly pass for only 2 weeks of travel is cheaper ($200) than the equivalent cash fares from Whangaparaoa for 10 business days ($206). I’m mystified by your mystification.
        The main opposition I have with monthly passes is the “calendar” month nature of them, it’s utterly arbitrary and pointless. The system they replaced allowed for flexibility within a given month, why the step backwards?
        I’m glad you mentioned Londons weekly travel card, a cost-effective similar option in Auckland would be the answer to my problem right there.

        • You’re miles off Barney. Auckland’s actual metropolitan area is about 530km2, you must be quoting the the Auckland political boundary which stretches from Wellsford to the Waikato river, and from the west coast to past the Hunua ranges (which is mostly filled with farms, mountains, wilderness and national parks.)

    • Steve

      @Barney – Auckland is trying to get away from on bus sales, to be able to buy monthlies or top-up would instantly kill the quicker boarding that smartcard ticketing offers. Snapper is a dog with this as you get charged a transaction fee unless you top-up at a kiosk (are there any in Auckland?) or shell out $40 for a feeder. However once the full Thales system is live, if the powers that be have even half a clue there will be no on board top ups, instead these will be able to be done via internet banking like a bill payment or at the retail outlets.

      Slightly off topic, but I’d really like to see single tickets available off bus and the CBD go prepay / HOP only during peak the same way that Sydney is and there is probably a case to be made for the Link routes, or at least the City / Inner ones being prepay / HOP at all times

  • Stu Donovan

    Off peak pricing is very interesting. I think Brisbane applies a 20% discount to GoCard users that travel in offpeak periods.

  • TimR

    The month-vs 10 trip tradeoff is a signifier of quite a lot of things wrong with the current pricing.

    I’m in a four-zone travel mode; the small differential between monthly and 10-trip means most people buy a 10-trip in order to have some travel flexibility. It only takes a couple of skipped journey legs a month (lift back with colleague, day off work) for the monthly option to lose you money. Everyone buys 10-trips -> conductor wastes more time, Veolia get a reduced certainty of cashflow, and people aren’t encouraged to maximise PT us. Even without integrated ticketing this situation could be addressed immediately.

    • Matt L

      I have seen that and actually notice some other interesting behaviour that happens.
      I get on at Sturges Rd and quite a few people use monthly passes. From Henderson the proportion of people using them does seem to drop quite a bit but there are still some but most use 10 trip tickets. When the train gets to Fruitvale Rd however I notice that even though it is the same fare stage as Henderson, quite a few people use city monthly passes and have a separate 10 trip single stage ticket.
      I suspect that they don’t use single trip ticket on the way home so is actually a form of fare evading but what ever the reason it is interesting to see it that it happens in one part of a fare stage but not another.

  • Family friendly pricing for weekends please! It’s hard to be an advocate for public transport when the cost of taking your family on the bus is about two or three times the (marginal) cost of taking your car and parking.

    • Peter

      Weekends are an interesting issue for sure. They’re a great opportunity for people new to PT to trial the system. I would agree that a cheap family pass is a great idea – if there were passes for different numbers of zones passed through then it could be more affordable. For example, $10 for travel within 1-2 zones $15 for 3-4 zones and $20 for five zones. Or something like that.

    • Peter in Sydney

      Sydney has family Sundays well and truly covered. It is called Funday Sunday and so long as you have an eligible child in the group it costs #2.50 per person all day for the whole Cityrail metwork. That’s Goulbourn, Nowra, Bathurst, Scone and Dungog which are way past Newcastle as well as Cronulla and Bondi Junction. The last two are limited by the Tasman Sea. It is as good as my Pensioner’s Excursion Ticket which is an all day ticket any day for the same $2.50.

    • Icebird

      While I was checking the Translink website, I noticed Vancouver has something similar to Sydney. If you have a valid monthly pass, you can take another adult and up to 4 children with you on Sundays for free anywhere your fare card is valid.

      Another bright idea that might be worth investigating – the student “U-Pass”. Basically all the tertiary institutions in Vancouver held referendums on whether to join the programme. If the institution chooses to take part, students are required to pay for a monthly pass – but mandatory participation allows them to keep the cost down to $30 per month, instead of the $150 per month that an all-zones pass would usually cost.

    • Stu Donovan

      I think the way to do it (as they do in several German cities) is to make adult monthly passes into an *offpeak* family pass. So it works as a normal monthly pass during the week, but turns into a family pass in evenings and weekends etc.

      • TimR

        It’s all sound business that is well understood in other transport modes – the Easyjet / cheap flights model. Why put on empty seats? Price to induce people to use your vehicles…. Simple really. Veolia, NZBus etc are only 15 years behind….

  • George D

    I like how Melbourne does things. Even with recent increases, a monthly Myki pass for zone one and two costs about $200 per month. But this gives unlimited travel on the entire network (Papakura to Warkworth in an Auckland context), across every mode, at every time. There are obviously less expensive options for those buying weekly, multi-use, and single zone products.

    Zone-based integrated ticketing means that a huge amount more value is offered to the user, at low marginal cost to the system. To put it another way, Auckland charges a lot for what it gives, comparatively.

    • I’m a fan of the Melbourne system, simply because it is so user friendly and simple. A zone one weekly is about $30, which itself covers an area larger than all of Auckland.
      That means you effectively buy a regular commute for three bucks each way (unlimited connections etc) and get all your midday, evening and weekend travel for free. As they say in Aussie, too easy mate!

  • LarryH

    With electronic ticketing, the simplest should be it automatically to only charge you for the 2 longest trips (not legs) per day, and for the 5 most expensive days out of the last 7. This way all the ticket combinations fall away and the weekends are free.

  • Louis

    I still quite like the system I proposed at http://transportblog.co.nz/2011/12/06/guest-post-integrated-ticketing-an-idea/. I completely agree about the need for much lower pricing for groups during off peak hours.

  • Greg N

    Interesting idea there LarryH,

    I can see some issues with how it would work in practice in that as you tag on for each trip it can’t know if its going to free or not trip at least until you tag off. Secondly the 2 trips per day has to be worked out retrospectively each day.

    One way I can see that working is if the system worked out retrospectively what you got charged each day/week and the over the maximum is then “rebated” by credits for the “free” trips the system worked out you shouldn’t have been charged for but were on a “pay as you tag off” basis?
    Or do you assume the card stores the last 7 days of fares charged, and let the “reader” work out the “net” difference to charge based on what I’ve done for the last day and last 7 days, then over or under the fare charge to make the daily and 7 day trip balance correct for each trip?

    Not sure though about the most expensive of the last 7 days though,
    Example using the train, but bus etc would be similar.
    What if I travel Glenn Innes to Britomart (say) each day M-F, on Saturday I tag on at GI for a trip to Henderson, system won’t know until I get to Henderson the fare to be charged (say its $8), but now that one way fare is more than the regular M-F “return” trips I took each day for the previous 5 days. (say GI to Britomart and back each day will be about $3.40 x 2 per day = $6.80)

    So does the fare system now “make” one of the M-F days (that I was charged a total of $680 for previously) “free” in retrospect and charge me for the Henderson trip as one of the 5 “expensive” days of the last 7 days?, so in this case the “nett difference” charged would be the $8 for the Henderson trip less the $6.80 fare paid earlier (say on Monday), so a net charge of $1.20 for this 1 trip.
    What happens when I make a return to GI by train, and what if I don’t come back by any PT at all that day (I get a lift or stay over that night)?

    This sort of thing would surely dissuade me my using my card off-peak/in the weekends for longer than usual trips as I then can get “whacked” for doing so when I take those longer/more expensive trips – and taking these trips on PT on weekends etc is what they are trying to encourage us to do I hope.

    • LarryH

      Getting “whached” for $1.20 for $8 worth of travel is not too bad. With any of the current ticket you would be wasting money every day anyway if this was your typical travel, since a city monthly would only take you as far as New Lynn. So the extra to Henderson would still need to be paid.

      The card would need to store the two most expensive trips so for each day, and the last seven days worth of charges. Each time you tagged off you would only be charged the for the difference if the trip is more expensive, that way no refunds and you know your balance immediately.

  • I can but look on with envy to that international fare comparison. Aucklanders paying 24c/km is dead cheap compared to our $1/km to and on Waiheke.

    • $1 per km, that’s much cheaper than most Sydney ferries. A MyFerry1 costs $5.60 one way, and the inner harbour ferry routes are only 1 to 3.3km in length.

      Hell the Devonport ferry costs $5.70 for 2.8km, so you’re doing much better than that.

  • SimonL

    Fares should be as simple as possible. While LarryH’s suggestion isn’t too bad, I think it would be confusing. Also why should you only pay for 10 journeys per week? That only really comes from “PT is for peak” thinking.

    Brisbane’s old system was a 50% discount after 10 journeys per week, and 20% off peak discounts. While this does have loopholes I wonder if the price is worth paying? Particularly if your system doesn’t extend about 200km from its centre like the Brisbane one.

    One other comment is that if short trips are relatively cheap, that is a good thing. It means it is more viable to live without a car in inner suburbs which saves on parking space. You should do anything to effectively subsidise long trips more, which are generally the most subsidised, as it results in people making less sustainable lifestyle choices and living a long way from home.

    I don’t see any reason to restrict the number of zones in a smart card world as the electronics can work out the number of zones and the fare easily.

  • Peter

    Good point about not wanting to subsidise long trips too much – as there is an advantage in encouraging people to live closer in. However, isn’t the point that if we can get long car trips onto PT the benefit is greatest (for congestion and for the environment) equally valid?

  • SimonL

    That’s true, but I tend to think it is outweighed by the social engineering of encouraging sustainable lifestyles. In general long trips are from further out and the land is cheaper out there so the benefit of not needing parking at the far terminus isn’t as much. Indeed, that benefit doesn’t apply at all in the case of Park and Ride, which is quite common in these cases.

    I should clarify that my previous comment should have been “You shouldn’t do anything …”. Not “should”.

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