Crossrail operating costs/profit

[absolutelymilk]

Crossrail is expected to have around 200 million journeys a year, which even at say £2 per journey gives £400 million per year. However they are going to pay MTR 1.4 billion over 8 years (175 million per year) to run the service. Even if this doesn't include the track access charges and the cost of leasing trains, this still leaves TfL making a huge operating profit on Crossrail - is this correct?

 

[matt_world2004]

Crossrail is expected to have around 200 million journeys a year, which even at say £2 per journey gives £400 million per year. However they are going to pay MTR 1.4 billion over 8 years (175 million per year) to run the service. Even if this doesn't include the track access charges and the cost of leasing trains, this still leaves TfL making a huge operating profit on Crossrail - is this correct?

Concessionary travel may reduce that cost. The operator (MTR) I believe pays the track access charges Also because of the way oyster works some of that £2.00 fare would be lost on interchange.

 

[Oliver]

Crossrail is expected to have around 200 million journeys a year, which even at say £2 per journey gives £400 million per year.

These 200 million journeys are not all new business. Much is diverted from other routes, e.g. Central line.

 

[telstarbox]

At least for the first few years, most of the passengers on Crossrail will be diverting from other routes so they won't be contributing any extra money to TfL.

 

[The Ham]

Crossrail is expected to have around 200 million journeys a year, which even at say £2 per journey gives £400 million per year. However they are going to pay MTR 1.4 billion over 8 years (175 million per year) to run the service. Even if this doesn't include the track access charges and the cost of leasing trains, this still leaves TfL making a huge operating profit on Crossrail - is this correct?

Yes and no.

Yes the receipts will more than cover the cost of running the trains, however there's going to be other costs. These could include the maintenance of the system (or at least setting up reserves to cover big future maintenance costs). There will also be the shared TfL costs (transaction costs, head office costs, etc.).

On the flip side there would be other income (station leases from shops, advertising revenue and the like) which would bolster income further. TfL talk about (for their whole TfL network) the non fares income being £3.4 billion over a 10 year period.

However, what's the problem, as all TfL profits get reinvented meaning improvements for London being paid for (at least in part) by London.

 

[Domh245]

Don't forget the various loans taken out to cover construction that'll need paying back eventually

 

[absolutelymilk]

Concessionary travel may reduce that cost. Also because of the way oyster works some of that £2.00 fare would be lost on interchange.

We don't know fares yet (as far as I know) but Tube fares range from £2.40 for travel in Zone 1 up to £5.10 for peak travel in Zones 1-6 (and even higher if you don't have an oyster card) so I think £2 is a reasonable conservative estimate.

However, what's the problem, as all TfL profits get reinvented meaning improvements for London being paid for (at least in part) by London.

Not saying there is a problem at all, it's brilliant that a new railway can make a significant operating profit. I just wanted to check whether my (very rough) calculations were in the right ballpark.

 

[matt_world2004]

We don't know fares yet (as far as I know) but Tube fares range from £2.40 for travel in Zone 1 up to £5.10 for peak travel in Zones 1-6 (and even higher if you don't have an oyster card) so I think £2 is a reasonable conservative estimate.

Yes but the average fare is often quite a bit lower for a trip once you factor in free travel. for young children oyster caps and interchanges. For example if someone takes two trains to work and spends a similar amount of time on each of them that £5.10 fare becomes £2 55. You could then have a child. Or staff whose fare is zero and that reduces the average fare further. You then have the retailers cut of the oyster top up etc etc. The average fare across the London buses network before the fare hopper was introduced was 70p for example

 

[absolutelymilk]

Yes but the average fare is often quite a bit lower for a trip once you factor in free travel. for young children oyster caps and interchanges. For example if someone takes two trains to work and spends a similar amount of time on each of them that £5.10 fare becomes £2 55. You could then have a child. Or staff whose fare is zero and that reduces the average fare further. You then have the retailers cut of the oyster top up etc etc. The average fare across the London buses network before the fare hopper was introduced was 70p for example

In 2016/17, LU carried 1.378 billion passengers and got £2.669 billion in fares, almost exactly £2 per passenger. As Crossrail passengers are likely to make longer journeys (and inflation will increase the fares) I think £2 is a reasonable estimate.

http://content.tfl.gov.uk/tfl-annual-report-2016-17-draft.pdf (p.17)

http://content.tfl.gov.uk/tfl-group-statement-of-accounts-for-201617-27-june.pdf (p.2)

 

[coppercapped]

In 2016/17, LU carried 1.378 billion passengers and got £2.669 billion in fares, almost exactly £2 per passenger. As Crossrail passengers are likely to make longer journeys (and inflation will increase the fares) I think £2 is a reasonable estimate.

http://content.tfl.gov.uk/tfl-annual-report-2016-17-draft.pdf (p.17)

http://content.tfl.gov.uk/tfl-group-statement-of-accounts-for-201617-27-june.pdf (p.2)

That makes sense - as an average fare that's probably not far out. My suspicion is that analysis is OK for the central areas, but the further out from London the numbers might be a bit different.

I'm not sure how one quantifies the other incomes and expenditures. Once off Crossrail metals - essentially the tunnel portals - I presume that Crossrail will pay the fixed and variable access charges to Network Rail in the same way that any other TOC does. In other words all trains west of Royal Oak to Airport Junction (for the Heathrow trains) and to Reading and from Pudding Mill to Shenfield.

There will also have to be some sort of ORCATS division of income between Crossrail and Greater Anglia for the Shenfield - London flows and similarly for the GW end. Journeys such as Slough - Reading and between Ealing Broadway and Maidenhead could also be made by GW.

I wonder if all this has been agreed yet?

 

[matt_world2004]

In 2016/17, LU carried 1.378 billion passengers and got £2.669 billion in fares, almost exactly £2 per passenger. As Crossrail passengers are likely to make longer journeys (and inflation will increase the fares) I think £2 is a reasonable estimate.

http://content.tfl.gov.uk/tfl-annual-report-2016-17-draft.pdf (p.17)

http://content.tfl.gov.uk/tfl-group-statement-of-accounts-for-201617-27-june.pdf (p.2)

Yes but when someone interchanges from one tube line because there are several tube lines they are quite likely to be getting on another tube line for example central to the Bakerloo. Bakerloo to the jubilee. They pay one fare despite interchanges. When someone changes on crossrail. They are almost certainly not going to change onto another crossrail line(except at points where the line divides into its branches) .Also a large part of crossrails fare revenue is going to be shared with gwr in the west and aga in the east and thats excluding the complexity of the heathrow free travel zone which makes up a larger proportion of the crossrail network than it does the tube network ( Tfl get reinbursed for free travel on the tube within heathrow. I dont know if this is the case for crossrail -it may be that reduced track access charges are paid in return for free carriage of heathrow passengers)
There is too many confounding variables using information that is not in the public domain before we can even remotely guess at what the average fare is going to be per trip.

 

[plcd1]

Crossrail is expected to have around 200 million journeys a year, which even at say £2 per journey gives £400 million per year. However they are going to pay MTR 1.4 billion over 8 years (175 million per year) to run the service. Even if this doesn't include the track access charges and the cost of leasing trains, this still leaves TfL making a huge operating profit on Crossrail - is this correct?

In basic terms yes. The TfL business plan shows a very considerable increase in revenues as Crossrail services build up. There is a fall in investment costs and maintenance costs will be relatively low early on. Crossrail has to earn an enormous surplus for years and years in order to pay back loans taken out to part fund its construction. The TfL business plan shows the LU (to include CR from 2018/19) operating surplus rising by a multiple of 5 from £234m in 2017/18 to £1,181m in 2020/21. Most of that increase will be Crossrail.

Others have cited a range of other issues and they're all perfectly legitimate but are very unlikely to affect the basic concept of earning a substantial surplus. TfL have factored in assumed transfers from other routes like the tube and DLR but any dip in patronage only lasts 2-3 years. The bigger issues are ensuring the reliability and dependability of the service so that passengers use it and keep using it. If it is a shambles for months after it opens then that will throw TfL's numbers off course. The other major unknown is the economy and central London / Docklands employment. If the economy crashes and along with it employment, commuting volumes and discretionary leisure travel then all bets are off.

 

[Olaf]

I've not seen the reports for future revenue projections from CR1 so I do not know what TfL is anticipating.

On the Business Pan linked below it is showing the average revenue per rail journey at approx GBP 1.80 per journey.

I've not read it in detail, but it also seems to suggest that costs are not being met by total income, and that cost projections are increasing faster that projected income (However, the report's projections do not cover a period of for full CR operation):

http://content.tfl.gov.uk/transport-for-london-budget-2017-18.pdf

Is there a more relevant source than this?

 

[plcd1]

I've not seen the reports for future revenue projections from CR1 so I do not know what TfL is anticipating.

On the Business Pan linked below it is showing the average revenue per rail journey at approx GBP 1.80 per journey.

I've not read it in detail, but it also seems to suggest that costs are not being met by total income, and that cost projections are increasing faster that projected income (However, the report's projections do not cover a period of for full CR operation):

http://content.tfl.gov.uk/transport-for-london-budget-2017-18.pdf

Is there a more relevant source than this?

I have maintained a summary spreadsheet of the numbers from multiple TfL Business Plans. You linked to one year's budget. The TfL Business Plan covers a 5 year look ahead and is readily accessible on the TfL website.

The numbers in the B Plan clearly show LU's revenue (which includes CR1 post 2018) *vastly* exceeded the operating costs so there is an operating profit. The business plan also shows what Crossrail's revenues are expected to be - £759m in 2021/22. Compare that to just £93m in 2017/18 (obviously just the Shenfield line).

As ever with TfL rail spending it is the cost of investment spend that turns any operating surplus into a net loss. There is expected to a loss of £402m in 2021/22 despite there being an LU / CR1 operating surplus of £1,188m.