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 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.
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.