FAS ANALYSED INFORMATION FROM MEDIA ABOUT GROWING PRICES FOR PASSENGER CARRIAGE IN THIRD-CLASS SLEEPERS

On 12 domestic routes in June – August 2019 in comparison with May 2019

FAS analyzed performance of the “Federal Passenger Company” OJSC (“FPC” OJSC a daughter company of “Russian Railways” OJSC) on the following routes (out and return): Moscow – Adler; Moscow – Smolensk; Moscow – Pskov; Moscow – Kazan; Yekaterinburg – Tyumen; Moscow – Kaliningrad; Novosibirsk – Tomsk; Moscow – Vologda; Moscow – Rostov-on-Don; Moscow – Izhevsk; Moscow – Yaroslavl; Moscow – St Petersburg from с 01.01.2017 to 01.06.2019 (some indicators - until 01.09.2019 in view of the booking pattern).

The “Federal Passenger Company” OJSC carries passengers on the above routes in competitive conditions, particularly, with other types of transport. Overall, there are 400 trains circulating on the 12 routes, including passing by trains that provide over 40% of passenger turnover of “FPC” OJSC. Competition with air traffic is developed on the Moscow – Adler; Moscow – Kazan; Moscow – Kaliningrad; Moscow – Rostov-on-Don; Moscow – St Petersburg routes. On the Moscow – St Petersburg route – competition with “Sapsan” high-speed trains (High-Speed Service Directorate of “Russian Railways”). Bus transportation and a choice between third-class sleepers and compartment carriages are also available.

In January – May 2019 supply of transportation capacity for “FPC” OJSC in general did not decrease in comparison with 2018 (40.4 billion seat-kilometer) with noncritical reduction in the third-class carriage segment (25,3 billion seat-kilometer  or 1%); a similar trend is observed on the above routes. The level of transportation capacity in June-August 2019 does not deviate from the level in 2018. No facts of restricting transportation capacity supply of for “FPC” OJSC in general as well as in the third-class carriage segment were revealed.

The level of demand on the above routes in January – May 2019 is +3% higher than in the preceding year. More than 12 million tickets were bought for the trains on the routes in questions, including 8 million tickets for third-class sleepers. The average use of seats (occupancy rate) increased by +1% reaching 68%. No sharp demand increase was registered.

As of 01.06.2019, sales for travels in June – August 2019 increased by 3%. The occupancy rate for June (the ration of sold tickets to the total seats) is 54%, July – 40%, August – 26%, i.e., over 60% seats for summer months are available for sale as of 01.06.2019. Sales of tickets for travel between the destination (end) points on the above routes in the third-class segment for June – August 2019 is 303,000 tickets or 30% of the expected sales volume for the summer season, i.e., no less than 700,000 tickets (70% seats) are available for sale and as expected will be additionally purchased in June – August 2019. No shortage of tickets for sale is found.

The average revenue rate (average income per 1 km of travel per passenger) on the above routes in the third-class segment in January – May 2019 was 1.8 RUB/passenger-km, which is at the level of the previous year (2018). The average cost rate was 2.2 RUB / passenger – km, which is 12% higher than in я 2018. The level of return and cost rates is in the middle of the rate range formed in the passenger carriage by all means of transport. Passenger transportation in third-class sleepers remains a loss-making operation for “FPC” OJSC. Losses are compensated through profit gains in the compartment segment and subsidies form the budget.

The tariffs used in the third-class segment do not exceed the ceiling level set in No.1343/18 FAS order of 21 September 2018 (see No.1 Appendix), and the tariff s indexed by 1.039 (+3.9%) for 2019, except the tariffs in the branded trains, for which “FPC” OJSC decided to apply an additional increasing coefficient - 1.5 (based on Clause 3 of No. 44 Order of Roscomtsen [the Committee of the Russian Federation on Pricing Policy] "On tariffs for cola and passenger transportation by rail” of 22.12.1993). The calendar-differentiated indices used by “FPC” OJSC do not contradict with  No. 2 Application to No.1343/18 FAS Order of 21.09.2018.

To increase efficiency of transportation capacity use “FPC” OJSC can apply discounts for the ceiling tariff levels set by the regulator. The companies use discounts as part of its marketing promotion campaigns and approves them in accord with the in-house standards. In January - June 2019, 30% - 50% discounts applied to 34, 36 seats (the last seats in the “compartment” part of the third-class sleepers) and top side seats. Around 20% of transportation capacity in the third-class segment were offered at reduced prices. In January - May 2019, 193,000 tickets (14%) between destination (end) points on the above 12 routes were sold at up to 50% discounts. There is a discount campaign for third-class sleepers in some trains in June 2019. At the moment there are no discount campaigns for travels in July – August 2019. Absence of information about discounts on the current date does not mean that no discounts will apply in July – August 2019. Use of discounts is determined by economic and social factors and is the right rather than an obligation of the carrier.

Around 78% of tickets are sold by “FPC” OJSC directly (on the web site of “Russians Railways” OJSC and pay-boxes) without mark-ups, 22% - through commercial cash-desks and internet agencies with additional commissions / agency remuneration.

Having analyzed and compared the above information, FAS has not found any factors of unreasonably sharp growth of tariffs for passenger transportation in third-class sleepers in June – August 2019 in comparison with May 2019. There are no grounds for applying antimonopoly measures.

To correctly compare tariffs in the third-class segment, FAS recommends “FPC” OJSC to refine its online informational resources and the official mobile application to increase passenger awareness about the discounted offers. Due to an extended booking pattern from 45 to 90 days, absence of information about discounts for tickets bought in advance should not mislead passengers when comparing discounted tickets with the cost of travel at full price, particularly, before possible announcement of discounts under promotion campaigns with the date of travel approaching.