Discount travel fare

A NATIONWIDE contactless smart card ticketing system is due to be fully implemented in Denmark by 2008, following a launch in the Greater Copenhagen area in 2006. Selected bidders are due to finalise their tenders this spring and the contract will be awarded in early 2005 (IRJ January p6).

The Danish Travel Card is unusual in covering an entire country. Most others cover a city or a region--though some of these may have a population larger than that of Denmark! The compatibility between the different areas of Denmark should, however, generate substantial cost reductions for the transport authorities involved and significant advantages for passengers.

The project started formally for the Greater Copenhagen area in 1995. Two subsequent developments led to it being expanded into a nationwide scheme. DSB and all regional authorities negotiated a successful bus/train agreement that became effective in 1997 and it was soon realised that travel cards would be able to absorb and improve this type of cooperation.

At about the same time, a few regional authorities introduced travel cards within their areas. Implementation proved difficult and the cards were not compatible with each other. DSB noted in addition that it resulted in clumsy solutions for passengers when train and bus operators had to cooperate within the framework of regional travel cards.

So, in 2000 it was decided to change the scope of the project to cover the whole of Denmark with passengers using a single card for public transport journeys anywhere in the country. DSB will use the same card equipment for local, regional, and long-distance train journeys, while each regional authority will be able to buy a complete travel card system off the shelf without any development effort or tendering process.

Validation is simple. The passenger checks in at the start of a journey and checks out at the end, with a check-in operation for any intermediate changes. The price of the journey is calculated from the distance "as the crow flies" between the first check in and the final check out. This basic principle cannot be universal, however, and some modifications have to be made in a number of cases, such as return journeys and journeys of a long duration compared with distance.

The journey is paid for either by drawing on the e-purse on the travel card (pre-paid) or by debiting the passenger's bank account (post-paid). This is in accordance with a formal agreement between the passenger and the transport authority, arranged when the travel card is issued. In case the passenger forgets to check out, a down payment is made at check in.

The travel card system allows for every journey to be just one journey in the sense that going from A to B anywhere in Denmark involves just one transport authority being responsible for pricing the journey no matter which operating companies provide different segments of the journey.

Rebating of journeys will take place using one of several discount bases accumulated on the travel card itself. For example, many DSB journeys, in numbers or value, during the previous three months can result in a percentage discount off the standard price of the next DSB journey. DSB may also offer a rebate on journeys on its own network for a frequent customer of regional transport authorities. Although these rebate functions have still to be defined in detail, they will, in principle, replace all other rebates. Existing discount products, such as season passes and multi-journey tickets will be abolished.

We expect that the travel card will be used for about 80% of all public transport journeys in Denmark with conventional paper tickets for the rest.

The main benefit of the Danish Travel Card is that the passenger does not need to bother about zones, distances, or which particular transport authorities are involved in a specific journey. The potential is also there to make better offers to passengers. Discounting can be more clearly differentiated by time and day of journey, the number of trains used, and customer loyalty.

One drawback, however, is that frequent users of season tickets can expect an increase in their overall commuting costs. On the other hand, less frequent users will have lower costs. Although this change will clearly not be popular everywhere, it is at least explainable as fair. Passengers will also be able to get a good overview of their travel patterns and costs as each travel card can have its own corresponding web page.

The collective customer benefits are expected to generate more travel, and DSB expects 2% extra revenue from this source.

All transport operators in Denmark must make their own business cases for joining the travel card system. DSB's business case is reasonably positive with an acceptable rate of return. It is summed up in Figure 1, which shows that on a pure operating basis, the travel card system has a positive impact on DSB, but on a total cost basis, including investment, the result is negative. DSB's business case is therefore dependent on the assumption of increased revenue. This means that DSB must focus on the impact on passengers when planning and implementing the system.

[FIGURE 1 OMITTED]

The Danish travel card will be run by Travel Card Ltd, a company set up by the main Danish transport authorities. It is responsible for the central system on behalf of all the participants (Figure 2). Each transport authority buys the local equipment, software, and services needed from Travel Card on the same conditions on which Travel Card buys from the supplier. This involves a back-to-back contract that reflects the relevant parts of the main contract. It offers the following advantages:

* there is only one contractual counterpart to the supplier--Travel Card Ltd

* the supplier takes care of design, production, installation, operation, and maintenance

* non-founding transport authorities may join the scheme later, without a separate tender, through calling options in the contract with the supplier, and

* ownership of the system may be easily expanded through issuing shares to other transport authorities, both public and private.

Danish transport authorities have joined their Swedish colleagues in a company that owns and develops the Nordic travel card specification. Both Swedish and Danish cards follow this specification so there is compatibility between cards issued by the different transport authorities in the two countries.

The most important practical cooperation concerns the future development of the existing ticketing system for the Oresund crossing, which was introduced to exploit the possibilities of the bridge/ tunnel connection between the Danish capital, Copenhagen, and Malmo in Sweden. It is envisaged that the new Travel Card will be valid for journeys across the Oresund.

[FIGURE 2 OMITTED]

Peter Noisier Petersen Project manager, Danish Travel Card, Danish State Railways (DSB)