Some passengers to get instant refunds if they are delayed - a clever marketing play of a genuine improvement?

Published: 5th October 2015

Train company profits to be hit by new policy – or will they?

A new system has been introduced making it easier for delayed passengers to obtain refunds if their trains are delayed. Passengers who book ahead on specific trains to get the best fares will benefit from a new initiative and an estimated additional £2.8 million compensation could be paid in first year.

Virgin Trains West Coast (VTWC) has introduced a system called ‘Automatic Delay Repay’ (ADR) scheme which calculates the amount of refund due for a given delay and then automatically refunds the compensation onto the card used to buy the ticket. The refund will be back with the passenger within three days.

Passengers will have to buy their advance ticket for VTWC services through www.virgintrains.co.uk or the mobile app and an estimated 3.5 million journeys could be eligible for refunds from the scheme.

Why?

Because Virgin will then have passengers’ bank details and will be able to repay easily. If passengers use another retail outlet then they will not have the required bank details.

Should I stay with my normal ticket retailer or switch?

So is it better to book with Virgin or other websites such as redspottedhanky.com? The latter will reward you with loyalty points and other special offers. Virgin will hope that more people will transfer to them thus increasing their revenue as they will not have to pay commission and this will easily outweigh the £2.8million they have budgeted to pay out.

And when you consider that a very low percentage of trains will be delayed enough for the delay repay scheme to kick-in, its mathematically more likely that you will benefit from staying with who you are.

Virgin Trains say that the new system could result in an extra £2.8 million being refunded for delays in the first year. This is because many passengers do not claim a refund because they do not have time or it is not worth claiming for a few pounds. Presumably Virgin will have considered how many extra passengers will now purchase their tickets directly with them rather than from other outlets which will generate more than the £2.8million expected to be paid out.

What happens to this money?

It remains with Virgin or the train company whose service is delayed as 100% profit.

How does the compensation system work?

Network Rail (NR) and the rail franchises are bound by a legal agreement called a Track Access Agreement (TAA). One of the Schedules in the TAA details how much is paid by each Party should they delay other services or they are delayed by something not their fault.

If a Virgin train delays a London Midland service then Virgin will have to pay compensation via NR who act as the rail industry banker. NR will then pass the payment through to London Midland. If NR delays services, and about 60% of all delays are due to NR with signal or points failures or overhead wire damage, then NR pays out to all rail companies.

A small army of delay attribution staff work in the rail Industry arguing whose fault a delay is. This is thought to cost tens of millions of pounds to run. This one reason that Delay Repay does not consider delays that are affected by, compounded by or have a consequence that involves other train operating companies.

This payment is to cover refunds and costs to train companies associated with the delays. For example, if a delay means buses or taxis have to be used to move passengers, then the compensation should cover this and refunds. But if train companies do not arrange buses or taxis, and passengers don’t claim their refund, then the money remains in the train company bank account and boosts profits.

This failing has been investigated by the Office of Road and Rail and Passenger Focus and hopefully the resulting pressure has made the Department for Transport (DfT) insist that franchise extensions and new franchises introduce a workable refund system.

Why hasn’t been introduced for all tickets?

An advance ticket can be bought for a specified train and if this train is delayed, it is easy to calculate any refund due. If a ticket is bought for any train, it becomes difficult as for example Coventry has three trains an hour to Euston so if one is delayed, the chances are that the next one will turn up before the 30 minute threshold is breached.

They said: Secretary of State for Transport, Patrick McLoughlin

commented, “Making it easier to get compensation when trains are delayed is a vital part of our plan for passengers. Today’s announcement is fantastic news for people travelling along the West Coast Mainline. Virgin Trains are making the most of modern technology to improve the service customers get. Our plan is to make sure passengers across the country benefit from schemes like this and we are encouraging other operators to roll out similar schemes nationwide.”

Phil Whittingham, Managing Director, Virgin Trains on the West Coast

added, We are delighted to be the first train company to automatically refund cash directly back onto customers’ payment cards should they be delayed by more than 30 minutes.

But it is a good scheme and offers a choice for passengers which can’t be a bad thing.

External Links

• Virgin Trains
• redspottedhanky