Internal Metrolinx reports pointed to lower UPX fares

theglobeandmail.com
Feb. 28, 2016
By Oliver Moore

Metrolinx knew before launching Toronto’s train to the airport last summer that prices in the $10 to $15 range were popular and would attract more riders, according to internal data, but pressure to recoup costs helped push the prices much higher.

The decision to set the cash fare for the Union Pearson Express at $27.50 has turned into a serious black eye for both the regional transit agency and the provincial government, which is keen to get the train breaking even quickly.

The gambit backfired. In spite of discounts, relatively few people were willing to pay the higher ticket price. The train was bleeding money. With the number of passengers falling short of expectations, officials eventually accepted that the fare structure would not achieve what they wanted.

Under increasing pressure from Queen’s Park, Metrolinx is cutting fares by more than half, effective March 9. The new price of $12 - or $9 with a Presto fare card, and less for riding only part of the distance - brings the cost into line with figures identified in the research done before the train launched. The new fares also jibe with the results of focus groups the agency did in January.

With the new ticket prices, though, the goal of having a train that breaks even - a key government requirement that contributed to the high initial fares - has become mathematically almost impossible unless costs can be reined in somehow.

After disclosing selected, and previously private, findings from several internal reports to The Globe and Mail late Friday, Metrolinx offered no further comment on the weekend. In a statement late Sunday, though, the agency added that "the pricing was intended to optimize ridership and revenue to move towards the recovery of costs on the operating side of the budget." The statement noted that setting the fares lower would have meant a "significantly longer" time for the UPX to reach break even.

“We went with our best judgment,” Metrolinx chair Rob Prichard said last week after a special board meeting to approve sharply lower ticket prices. “The first [fare] was a judgment, the [new] one’s a judgment. We’re confident this will increase ridership...but at the end of the day, there’s no magic formula that turns it out. It’s a matter of judgment.”

The new information provides insight into the conflicting pressures that were on the transit agency as it sought to find the right fare for the UPX.

According to the materials released by Metrolinx, an Environics survey in 2014 found that half of respondents thought $12 would be a good value for the train. A redacted portion of a report done in 2013 by the consulting firm Steer Davies Gleave showed that more people would ride the train if it cost $10 to $15 than at a higher price. But the lower costs mentioned in the latter report would have led to another problem. Agency spokeswoman Anne Marie Aikins explained in an e-mail on Friday that the lower fares would mean “longer periods to achieve cost recovery.”

Setting fares for transit can appear deceptively simple, with researchers producing models that show how many people will ride at different prices. But it quickly gets complicated, forcing policy or political decisions about how to balance ridership and cost. Metrolinx is currently tackling the thorny issue in its attempt at regional transit fare integration.

While agencies such as the Toronto Transit Commission have the straightforward goal of carrying as many people as possible, Metrolinx found itself with a more complicated calculus trying to price the UPX.

Metrolinx wanted a price lower than a limousine, and were taking into account as well the cost of other such trains and the highway coach then running to the airport. Aware that the provincial government had given them the project with the expectation that it would recover its costs within a reasonable time, the agency also wanted to maximize fare-box revenues. And it did not want the trains to get too crowded.

The new fare structure is expected to boost the number of riders, although it remains to be seen if passenger levels will climb enough to produce as much fare-revenue at the reduced price as at the unpopular old one.

“We want to attract as much ridership as possible,” Metrolinx CEO Bruce McCuaig said on Tuesday evening after the special meeting of the board.

“Our hope is we’re going to be attracting more and more riders to the service...The trains are more and more full as people start to use the system, become familiar with the service, become more and more loyal to the service. That’s really what this is all about, is how can we build the ridership?”