Cheaper Train Tickets, More Profits

Posted on January 2, 2008 by  Ben Connard

I reverse commute from New York to Katonah using the Metro-North train. The train ride is usually pretty quiet as most commuters know the drill—have your ticket out, show the conductor, go back to sleep.

On the way home there is often a passenger who does not know the drill. And often does not have a ticket. The price of a ticket depends on where it’s purchased; a ticket from Katonah to New York is $8.75 at the station and $14.75 on board. Upon hearing about the 60% mark-up the passenger often questions the mark-up and sometimes gives excuses for not having a ticket. The conductor ignores the complaints and issues the ticket.

When the Metro-North first jacked up the on-board fairs I also questioned the rates, feeling the punishment didn’t fit the crime. After riding the train for many years I understand the mark-up is not punishment, but paying for the additional labor required to process the ticket.

Tickets purchased at the station are done at an ATM like machine and once on the train it takes less the 10 seconds for the conductor to take the ticket and complete the transaction. When you buy on-board, the transaction includes the conductor receiving cash, creating the ticket, giving the passenger a receipt, and making change. The process takes a couple of minutes, and even more when the passenger complains.

The time difference is important because the conductor has to check hundreds of tickets over several cars before the train stops and passengers can get off without paying. When it takes less time to check the tickets, one conductor can check more tickets and ultimately fewer conductors are needed on each train. This can save the Metro-North significant salary as train conductor salaries can exceed $100,000. Thirty three trains run from New York to Katonah each day so knock out a dozen conductors and the savings reach into the millions. Metro-North has further streamlined the process as conductors only sell one-way instead of round-trip tickets, which can take significant time to process as rates vary depending on the time of day.

Ideally, the savings are passed onto the passengers in lower ticket prices. The interesting result of the ticket pricing is that the company and the consumer have the same preferred outcome. The consumer obviously wants the lower priced ticket. One might assume the company wants you to buy the higher priced ticket. However, the lower priced ticket is actually more profitable and therefore the preferred outcome for both consumer and company.