2024

PUBLIC TRANSPORT
FA R E M O D E L S
The right moment to revisit
fare models & help transport
authorities cope withchallenges

CONTENTE XECUTIVE SUMMARY
1.

3

PUBLIC TR ANSPORT GOAL S & POTENTIAL
MEASURES

2.

6

S T R O N G M O M E N T U M F O R FA R E S T R AT E G Y
REDEFINITION

83.

FA R E M O D E L S & A D J U S T M E N T FA C T O R S

104.

D E S I G N I N G I D E A L FA R E M O D E L

16CONCLUSIONLARS THURMANN-MOE

FRANCOIS-JOSEPH VAN AUDENHOVE

Partner
Head of Nordics, Growth Practice
OsloManaging Partner
Global Practice Leader,Travel & Transportation PracticeBrussels

MICK AEL TAUVEL
Partner
Head of Mobility Competence Center,
Travel & Transportation Practice
Paris

2

18

ANDREAS DOBLOUG
Consultant
Growth Practice
OsloARTHUR D. LITTLEEXECUTIVE SUMMARY
Since the COVID-19 outbreak and the war in Ukraine, thepublic transport funding equation has been challenged
by new ridership patterns (impacting traffic and thelevel of adoption of subscription-based fares), inflation(raising the cost of operations), and an acceleration in
the development of alternative transportation options(owned or shared). While price increases in public
transport fares have been limited so far, we believe
there is an opportunity to revisit fare models, as publicauthorities increasingly show a willingness to support
multimodal integration and ticketing digitalization
enables innovation in pricing and marketing. This Report
identifies the need for public transport authorities(PTAs) to reassess fare models, leveraging digitalization
and an increased willingness for alternativetransportation models, and explores the following:
1. Public transport goals and potential measures.
We discuss fare collection’s share of public transport
financing and key levers to increase attractivenessfor the transport network. We highlight some key
considerations for PTAs when developing a faremodel, while also keeping in mind that a model
is just one of the tools a PTA has at its disposal
to achieve goals.
2. Strong momentum for fare strategy redefinition.
Recent events have increased the pressure on the
public transport funding equation. With increasing
operational costs, environmental transitioning,
shared mobility, and integration of additional modes— alongside technlogical advances and changes intravel behavior following the pandemic — it is hightime to revisit fare strategy, which for many PTAs
has remained unchanged for a long time.

3

R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

3. Fare models and adjustment factors. For
a common vantage point for discussion, we
present our definition of a price model and its
design components. Furthermore, we provide anassessment of the general characteristics of themost common price drivers, including geographic
zone–based models, distance-based models,personal zone–based models, and flat fare models.
We also discuss the most common adjustment
factors, loyalty factors, user types, and time andmode differentiation.
4. Designing an ideal fare model. Finally, to help PTAs
design their ideal fare model, we present a five-stepframework that provides a systematic approach tonavigate the process effectively.
The Report emphasizes the array of benefits anddrawbacks inherent in various price drivers andadjustment factors, offering PTAs a broad spectrumof options to construct their ideal fare model.

4

ARTHUR D. LITTLE

5

R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

1. PUBLIC TR ANSPORT GOALS& POTENTIAL MEASURESTHE OVER ALL PUBLIC
TR ANSPORT GOAL S
A R E G E N E R A L LY
T H E S A M E F O R P TA s
AROUND THE WORLD

The fare model is the core of any public
transport network. In fact, fare collection
often contributes as much as 20%-50% of thefinancing of urban transport network operating
costs (see Figure 1). Affordability, readability,
and simplicity of fares are levers for greater
attractiveness.
A fare model for public transport should bedesigned in consideration of the mobility
system’s goals, capabilities, and constraints.
Although local variations exist, the overallpublic transport goals are generally the samefor PTAs around the world: to make mobility
more environmentally friendly and provide
simple, safe, and predictable travel in an
efficient manner. These goals are balanced
against the cost of operation and public funding
to provide the services.

Figure 1. Share of fares in total mobility budget

Figure 1. Farebox ratio in public transportation networks% revenues, 2022
50%

48%

45%

41%

40%

41%
34%

35%

29%

30%

28%

25%

23%

20%
15%
10%
5%
0%

LondonBerlinSource: Arthur D. Little, Cerema

6

Paris

Brussels

MadridGenevaRome

ARTHUR D. LITTLE

MANY SOLUTIONS ARE
INTERCONNECTED, SO
MAPPING OPTIONS BASEDON CURRENT SOLUTIONSI S I M P O R TA N T

While fare models can support the achievementof public transport goals, it is only one of many
tools PTAs have at their disposal (see Figure 2).
PTAs should therefore consider the available
options based on what goals they want toachieve with their fare model, as no model isequipped to solve every challenge. For example,
a typical conflict when discussing fare models is
the trade-off between optimizing user behavior
and simplifying the journey, since optimization
often also adds complexity.
The capabilities of both the PTA and the users,
together with the regulatory landscape, will set
the boundaries for what solutions are possible
for all aspects of the journey, including payment
and ticket solutions, validation technology, andfare models. Many solutions are interconnected,
so mapping the options based on the current
solutions is important to understand what faremodels are possible.

Figure 2. Tools available for PTAs to achieve goals
Figure 2. Tools available for PTAs to achieve goals
ComfortReliability

Price level

Route offer

Fare modelTransport mode
Price

Transport offer

Payment solution

Information

Ticket solution
Customer service

Build trust

Tools
MarketingCustomerinterface

Change of attitude

Other political tools
Source: Arthur D. Little

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R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

2. STRONG MOMENTUM FOR
FA R E S T R AT E G Y R E D E F I N I T I O N

C U RR EN T STAT E OF AFFAIRS
There is strong momentum to revisit fare models
given the ongoing funding challenges, expanded
digitalization, changing mobility landscape,and evolving travel patterns. In recent years,
the public transport funding equation has faced
various challenges, including:- Rising operating costs. Since 2022, Le

THE USE OF BIG
D ATA , A R T I F I C I A L
INTELLIGENCE, AND
MACHINE LE ARNING
WILL ALLOW MOREA C C U R AT E P R E D I C T I O N SO F C U S T O M E R B E H AV I O R

Parisien reports that PTAs and public transport
operators (PTOs) have faced increasing
operating expenses due to increases in energy
prices (an increase of 1.6x for Paris Metro)and the impact of inflation on labor costs (anincrease of 5.2% in 2022 for Paris PTO RATP
Group) that could lead to increases in thehundreds of millions of dollars (an increaseof US $219 million in OPEX in 2022 and $222-

million in the first half of 2023 for RATP).
Green transition. In the medium term,

evolving, affecting several aspects of the public
transport journey. In our 2020 Arthur D. Little(ADL) Viewpoint “Dematerialized Ticketing,”
we wrote about how server-centric ticketingallows the introduction of innovative pricing
schemes as customers can be billed once
they have completed their trips. The use of
big data, artificial intelligence, and machinedifferent transportation networks will havelearning will allow more accurate predictions of

to support higher investment to finance thecustomer behavior and improve several aspects

green transition (e.g., bus fleets are expectedof travel, including route optimization, the use

to convert to electric, which may translateof materials, safety, and the personalization

to higher CAPEX but lower total cost ofof services. Within validation technology,

ownership).

Check-in/Be-out (CiBo) and Be-in/Be-out (BiBo)- Changing scope of financing. PTAs in someregions are financing shared mobility (e.g., theintegration of carpooling in the subscriptionbased product Navigo in Paris, France), though
it comprises a low portion of the funding
equation.

- Integration of fares between modes andnetworks. Increasingly, PTAs and PTOs

are seeking to integrate national, regional,
and city-based transportation fares (e.g.,
Switzerland’s integrated fares system,
Germany’s new Rail Pass, and upcoming
projects in France that integrate regional
trains and urban networks).

8

The available technology is also continuously

ticketing systems are continuously tested andcan open the door for new pricing schemes once
they become commercially viable, as models
that previously required several interactions can
now be automated.

ARTHUR D. LITTLE

AMONG E XPECTEDTRENDS IS THE
E VOLUTION OF
T R I P PAT T E R N S ,AS CUSTOMERSARE E XPECTED TO
REPURPOSE, RETIME,A N D R E S PA C E T H E I R
T R AV E L PAT T E R N

Finally, societies are returning to normal
following the COVID-19 pandemic, whenpublic transport was significantly affectedby lockdowns, social distancing, and hygiene
requirements. As societies reopen, mostobservers agree that at least some of thechanges in behavior are expected to endure,as covered in the ADL Report “The Future of
Mobility Post-COVID.” Among the expectedlasting trends is the evolution of trip patterns,
as customers are expected to repurpose,
retime, and respace their travel patterns. With
increased work from home expected to last
to some degree, we anticipate customers willcontinue to repurpose their trips from work

The mobility landscape is increasingly being
viewed as a single system. Going forward, we
expect to see greater system integration.
For public transport, this will likely mean
integrating additional transport modes such as
electric scooters for first/last-mile transportand eventually a fully integrated mobility-asa-service network. For PTAs, this is a vital trend

travel to more travel for home needs, respace
their trips to shorter local trips, and use theincreased flexibility to retime their trips by
taking fewer trips during peak hours. This trend
has a significant impact on what loyalty factor is
the ideal choice for a transport network, but ouranalysis has shown it has less importance forthe choice of price driver in the fare model.

from a sustainability perspective to effectively
fight the dominance of personal vehicles.

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R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

3 . FA R E M O D E L S &A D J U S T M E N T FAC TO R S

C O N T EN TS OF A FAR E MODE L
Fare calculation starts with a price driver,which is subsequently fine-tuned by one or a
combination of adjustment factors, includingtime differentiation, user type, loyalty, andmode (see Figure 3).
A model’s price driver calculates a journey’s base

THE NET WORK’SFINANCING MODEL
AND ITS CONTRIBUTORSWILL INFLUENCE AND
GUIDE THE CHOICE OF
FA R E M O D E L

fare (typically, the fare for an adult passenger).
Depending on the model, the base fare would
often have a variable component (distance/

In addition to the internal factors of a faretime/number of zones) and possibly a fixedmodel, external factors also influence

component (starting price). The base can thenwhat models a PTA could utilize. A public

be adjusted by a series of factors. The number

transportation network’s characteristics

of adjustment factors in a fare model varies, but(e.g., size, hilliness, congestion, and more) willa few are far more common and are the focus of

influence what options are viable. The network’s

this Report. In the following section, we discuss

financing model and its contributors will also

the pros and cons of the most common priceinfluence the process and will likely guide thedrivers and adjustment factors.

choice of fare model.

Figure 3. Fare calculation options

Adjustment factors

Figure 3. Fare calculation options
DESCRIPTION

EXAMPLESPRICE DRIVER

Base fare adult passenger

Geographic zone, distance-based

Time differentiation

Adjustment due to time of day

Peak pricing, off-peak discountUser type

Discounts for different user types

Student, pensioner

LoyaltyFrequent-travel incentives

Capping, period passMode

Mode of transportation used

Bus, tram

JOURNEY FARE
Source: Arthur D. Little

10

ARTHUR D. LITTLE

P R I C E D RI VER S

same. If the zones are large, one can travel longer

The four price drivers we cover can be designed

between two stations. This can be viewed as unfair

distances for the same price as for a journey

in several ways, but we aim to highlight the mostgeneral characteristics in this Report. Eachby the travelers, but it also incentivizes journeys
by walking and cycling on shorter distances andreduces the incentive to use personal cars ondriver comes with its own set of pros and cons

longer journeys, in line with public mobility goals.

but are all used in cities around the world in

The position and size of the zones are importantdifferent combinations (see Figure 4).

decisions when implementing the system, aschanging the zone boundaries are difficult once

Geographic zone

they are established. Having more zones reduces
the difference but also increases the system’s

In a geographic zone–based model, the area iscomplexity and makes it harder to choose thedivided into separate geographic zones, typically
centered around the area of the city that attracts
the most trips. The traveler buys a ticket based on
the number of zones that their trip covers.

correct ticket. This has been the argument for
many mobility systems, as cities like Helsinki andBelgrade have reduced the number of zones inrecent years.

This system is widely used around the world. It is

One clear disadvantage is shorter trips acrosspredictable for consumers, as daily journeys willzone boundaries. Consumers starting their

have the same fare, but can be challenging fortrips close to the edge of a zone will pay an

passengers who don’t travel regularly, including

unreasonably high price for short trips, bothtourists. To buy the correct ticket, a passenger
must know where the zones are placed and where
stations are located, which could be challenging

compared to the cost of the trip and comparedto other passengers, which is perceived as

for passengers unfamiliar with the system.

unfair. However, there are ways to resolve

Another characteristic of this model is that

implemented in Helsinki in 2019, all tickets

this issue. For example, in the zone model
cover at least two zones.

short trips are relatively expensive compared tolonger trips, as all trips within the zone cost the

Figure 4. Price drivers
Figure 4. Price drivers
PRICE DRIVERRATIONALE

IMPLEMENTED IN

PROS(non-exhaustive)••

Predictable
Incentivizes walking& cycling

Tokyo, Seoul•

Perceived as fair

Removes most unfair
elements of classic
geographic zone model

Malmö

•
•

Perceived as fair
Travelers can customize
to fit their preferences

Very simple & alignedwith public transportmode goals

Stockholm, Riga, Ile France•

Incentivizes reduce useof personal vehicles

Geographic zone

Relatively simple whilealigned with public
transport mode goals

London, Oslo,many other cities

Distance-based

Fare price & distancetraveled/journey costdirectly connected

Personal zone

Flat fare

CONS
•
•

Short trips acrosszones
Challenging for new
users

•

Start & end must be
registered, favors
barred systems withcurrent technology•

Requires digitally
mature travelers
Marketing campaigns
required to implement•••

Could be perceived as
unfair in large areas
Requires priceincreases

Source: Arthur D. Little

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R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

A I R D I S TA N C E M O D E L S
COULD SEE CONSUMERS
PAY S I G N I F I C A N T LY
LES S THAN THE AC TUAL
D I S TA N C E T R AV E L E D

Personal zone
A personal zone model can be viewed as a mobile
geographic zone model or a distance-basedmodel, with larger distance intervals. One suchmodel was introduced in 2017 in the Skåne
region in Sweden, which includes the city of
Malmö.
In general, a passenger is given a personal

Distance-basedzone with a radius in which he or she can travel.

In a distance-based model, the fare andhigher price, similar to crossing a boundary in a

distance traveled are directly connected. The
model typically calls for a minimum price inaddition to a price per mile or kilometer, which
could be regressive.
Distance-based fare models can be basedon the actual distance traveled or the “airdistance” (distance between two places drawn
in a straight line) between the starting andending location. Both are perceived as fair byconsumers as they pay only for their actual
consumption. The models are also connectedto the variable costs of operation, especiallymodels using actual distance traveled. Thisaligns the interest of the consumer andproducer to a larger degree.
The differences between the two model options
are minor. A downside for using a model based on
actual distance is that consumers can perceive
it as unfair for transport options that do nottake the most efficient route, which increases
the fare. Similarly, air distance models could see
consumers pay significantly less than the actual
distance traveled if the route contains detours
and therefore does not reflect the journey’s
production cost.
A downside for both models is that both thestart and end positions must be registeredfor every journey in order to calculate thecorrect fare. This makes the model more suitedfor barred systems (where physical gates arepresent) using currently available technology.
When technology for automatic registration ofjourneys like CiBo/BiBo becomes commercially
viable, the customer experience in an honorbased (non-barred) system would significantly
improve.

12

Travel to a destination outside the zone has ageographic zone–based model. The differenceis that the zones are based on the individual
passenger instead of set positions.
One advantage of this model is that passengers
won’t cross any boundaries during short trips,
which can happen with static geographic
zones. The size of the personal zone can also be
adjusted based on the area of origin, as trips inrural areas are generally longer in distance thandensely populated areas. The zone could either
be bound to the person or to the individual
ticket. If connected to the person, travelers
could customize the model to fit their own
preferences, placing their personal zone in thearea most beneficial for them.
Digital maturity is important in implementing
this model, as it is difficult for customers toknow where the boundary of their personal zone
is without a mobile ticket. Another challenge isthat passengers may not be aware of the lengthof their trips and whether their daily commute
will require a ticket valid in one or more zones.
In total, the model requires high-quality
interfaces, support, and publicity to implement.
Flat fare
In a flat fare model, there is a single price fortickets valid in the entire area of operation.
The major upside of this model is the simplicity,which is the main argument for PTAs thathave implemented it, including Stockholm.
In Germany, PTAs have even introduced theDeutschlandticket, which provides access topublic transport throughout the country.

ARTHUR D. LITTLE

Depending on the size of the area, the flat fare

The simplicity, however, often comes with a minor

model gives customers the chance to travelincrease in price for most journeys comparedlong distances for a relatively low price, while

to employing more complex models. This ischarging the same price for short trips. Thisbecause there is less price differentiation in themodel aligns with many PTAs’ goal of increasing

model, bringing all prices closer to the mean.

the share of travel by bicycle and walking while

Our customer survey implies that customers

reducing the market share of cars.

welcome the simplicity of a flat fare model but are

Another argument in favor of this model is thatshort trips most often occur in urban areas, where
the travelers have access to a vast array of travel
options and modes with frequent departures,
while trips in rural areas are typically longer, lessconcerned about the potential price increase on
short journeys, which would affect most travelers.

ADJUSTMENT FACTORS

frequent, and involve less efficient modes of

Most PTOs use adjustment factors in their faretransport. However, if the area of operation is ofmodels. The most common types are loyalty

a significant size, the relative price difference forbenefits (adjustment factors that reduce the pricelong trips would be disproportionally large andof travel based on frequent journeys) and user

hence may be perceived as unfair.

type, but in this section, we also discuss some lessfrequently used adjustment factors (see Figure 5).

A way to mitigate this price difference is to
add a time limit to tickets, which hinders theoption of traveling across the entire area. The
traveler then must buy another ticket if his or
her trip exceeds the limit, functioning similarly
to a zone boundary in a geographic zone model.
The advantage of this model is simplicity. Thereis only one price for the traveler to be aware

Prepaid travel cards
Prepaid travel cards are still the most common
form of loyalty, giving the passenger unlimited
journeys for a set period. Alternative durations
are typically offered, ranging from 24 hours
to 365 days, but the 30-day pass is the mostof, as well as the potential time limit. The
purchase of a second ticket could be done whenneeded, and alerts or similar solutions could
make the traveler aware of additional purchaserequirements.

widely used. The prepaid travel card is very easy
to use and doesn’t require validation for every
journey in a non-barred system and provides anattractive offering to frequent travelers due tothe high discounts that are possible.

Figure 5. Fare model adjustment factors

Figure 5. Fare model adjustment factors
ADJUSTMENT
FACTORRATIONALE

IMPLEMENTED IN

PROS(non-exhaustive)•

Prepaid travel cards

Simple & can be analog

Most cities in the world

Capping

Ensures best pricefor traveler

London, Malmö, Victoria

Membership

Gives loyalty benefits
without journeys
becoming freeUnknown

Quantity discounts

Loyalty benefits
for all travelers

Oslo

User type

Increases access for allparticipants to transportsystemMost cities in the world

Time differentiation

Reduces congestionin peak periods

London, MoscowModedifferentiation

Fare prices reflect costsof operation to a higher
degreeMost cities in the world

•
•
•
•
•

Beneficial for frequent
travelers
Simple to use
Ensures best available
price for travelers
Simple to use
Loyalty benefits for moretravelers than travel cards
Journeys don’t become
free

CONS
•
•
•
•
•
•

Journeys can beperceived as free
Doesn’t fit sporadic
travel pattern
Journeys can beperceived as freeMust register all journeys
until cap is reached
Difficult for travelers
to assess the benefit
All journeys must
be registered•••

Only one ticket to consider •Ensures best price•
Loyalty benefits after 1 trip

Price is less predictable
Higher price for mostfrequent travelers•

Reduced prices for lower
income groups to increase
access to transportsystem

•

N/A

•
•

Reduced congestion
Reduces operating costs
for PTAs•

Perceived as unfair onbehalf of travelers that
can’t adjust travel times•

Balances demand
between modes
Price reflects quality••

Adds complexity
Reduces access to mostefficient transport modes•

Source: Arthur D. Little
Source: Arthur D. Little

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R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

At the same time, prepaid travel cards havesome well-known downsides. The pandemic
and associated increase in working from homedemonstrated that this form of loyalty is lesswell-equipped to incentivize a more flexible andunpredictable travel pattern. To garner loyalty
benefits, the traveler must know in advance thathe or she will travel a certain number of trips inthe coming period, which can make it difficult
for users to determine the investment’s worth.
High up-front costs also make it difficult for
low-income groups to utilize the system. The
final downside is that journeys could be perceived
as free, increasing the portion of short journeys
that could have been taken by bicycle or on footinstead, increasing congestion in public transport.

Membership
For some time, a membership model has been
considered for public transport, but to ourknowledge it has not yet been implemented
in any mobility systems. With a membership,
travelers pay a monthly amount to accesscheaper single fare tickets. While most changes
in recent years have been in the direction of
simplification, a membership model would
instead focus on optimization, but it comeswith an added layer of complexity.
Assessing whether a membership is worth
the investment is harder than assessing aprepaid travel card, since it includes the costof subsequent journeys. This was evident in ourcustomer surveys, where many respondents

Capping
A fare-capping model has been introduced inmany cities around the world, including London,
Malmö, and Victoria. The model sets a maximum
amount a traveler can spend per day/week/month,effectively functioning as a prepaid travel card
once travelers have reached their cap. Its effecton travel behavior is also similar to the prepaid
travel card model, with some differences.
One advantage of fare capping is that travelers
don’t need to determine in advance their travelneeds for a given period. The cap ensures that
customers always receive the best price possible.
Like the prepaid card, it also gives a significant
benefit to the most frequent travelers, as every
additional journey beyond the cap is free.
However, the added benefits do add somewere confused as to how the model would work.
Similar to capping, the model would also requirea ticket at every journey, which is a hurdle fortravelers in non-barred systems.
The benefit of the model is that more travelers
enjoy loyalty benefits. Our simulations showedthat with a membership costs 50% lower thana prepaid travel card, single ticket prices
could be reduced by 80%. This significantly
reduced the prices for customers taking two to
three journeys a week without necessitating asignificant increase in prices for more frequent
travelers. The model increased the market
share of public transport compared to cars,
since longer journeys became cheaper, while
also increasing the market share of walking
and bicycles because every journey, including
the shortest, had a price.

complexities. In non-barred mobility systems,
travelers would have to purchase a ticket at every
journey until they have achieved the cap. Our
simulations also show that implementing a cap
compared to prepaid travel cards requires a minor
increase in prices to maintain the same revenues.
This is a result of travelers who miscalculate theirtravel needs and therefore purchase non-optimal
tickets. Also, some travelers are willing to pay alittle extra for a prepaid ticket to avoid purchasing
a ticket at every journey.
Customers generally perceive capping as asuitable alternative in times where their travelneeds are uncertain, but in a non-barred system,
they are reluctant to having it as the only loyalty
alternative, as they enjoy the simplicity in the
prepaid card and don’t want to purchase a ticketat every journey.

14

Quantity discounts
The final loyalty factor we will discuss isquantity discounts. Prepaid single ticket
quantity discounts have been common in
mobility systems for some time, but with
developing technology, more advanced,
seamless pay-as-you-go alternatives havebecome available. In our simulations, thequantity discount model was designed to givean increasingly higher discount for each journeytaken within a given period. This required thetravel card to be connected to an account toregister the benefits.

ARTHUR D. LITTLE

The model’s advantage is that every travelerThis factor was frequently discussed during thetaking more than one journey during the time

pandemic to incentivize social distancing, but

period achieves loyalty benefits. To maintainas things have returned to normal and operators

income levels, however, this means that thehave seen their costs increase significantly,

most frequent travelers had an increase in price,

countries like Northern Ireland have instead

even with quantity discounts as high as 80%.

moved away from the factor and eliminated

The low amount of journeys needed to attain atheir early bird ticket options. Our models

sufficient discount proved to outweigh the costsuggest that peak pricing could be efficient inof the prepaid travel card. Similar to capping,moving journeys, as more than 10% of journeys

the model also secures the best possible price

moved to off-peak in our simulations whenfor every traveler.

introducing time differentiation.

Again, the model also requires the purchase of

The clear downside of time differentiation

a ticket at every journey, and the price of theis that it punishes those who cannot adjust

journey becomes less predictable. This means

when they travel, including some low-incomethat the model is better suited in a system

travelers, and can therefore be viewed aswhere journey registration occurs automatically.

unsocial. According to our survey, travelers
understood why peak pricing is a reasonable

User type
Another adjustment factor that most transportsystems use are discounts for different user
types. This could be tickets for children,
students, senior citizens or pensioners, oranother group, increasing access for theseparticipants to the public transport system.

factor, but they were sympathetic to those
without choice. Overall, the factor received avery negative score from customers. In addition,
all routes in a system do not have the same
issues with congestion and therefore do nothave the same need for time differentiation. In
certain areas it would therefore add complexity
without solving a problem.

User type discounts are generally assumed in
mobility systems, but one user type discounthas received some debate in recent years.

Mode differentiation

Historically, senior citizens were among the

The final factor for our discussion is mode

lowest earners in most countries, but with thedifferentiation, or different prices for different

increase in living standards and property prices

vehicles in the mobility system. The rationale

in recent decades, pensioners are now among

for this factor is that all modes do not havethe wealthiest groups in many countries. The

the same quality or cost of operation, andquestion of whether senior citizens need andifferentiation modes could therefore balance

added discount for public transport services has

demand while reflecting the cost of operation

therefore been a point of discussion; however,in ticket prices. The factor is generally mostour simulations show that changing the discountrelevant in mobility systems where trains

for pensioners has a low overall impact on theare included, as long journeys could be

mobility system, and removing the option isdisproportionately cheap in some price models.

perceived negatively.
Time differentiation
A more controversial factor, which some cities
have introduced and that could become more
popular in the future, is peak pricing, or timedifferentiation. Nudging travelers to off-

Our simulations show that mode differentiation
is effective in balancing demand between
modes, but the added complexity is notappreciated by travelers. In our survey,
respondents point to mode differentiation as
more negative than time differentiation, as theyhighly appreciate a seamless mobility system.

peak journeys both reduces congestion and isfinancially beneficial for the system because
peak hours often require additional capacitythat is difficult to utilize during non-peak hours.

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R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

4 . D E S I G N I N G I D E A L FA R E M O D E L

To help determine which model is the best fit,

In this step, PTAs should also map

ADL has developed a five-point framework forconstraints for a new fare model. Depending

PTAs to design the best fare model for theiron the transport system, the PTA will havetransport system (see Figure 6):

contracts that determine which fare models
are applicable. There could, for example, be

1. Assess current model’s achievement oflegal constraints on the types of solutions

travel transport goals. This as-is assessmentthat can or must be provided, technicalprovides the foundation for what should be

limitations in the system or among users,

improved by implementing a new price model.

income demands, or other constraints.
These should be mapped to enable the initial

2. Develop evaluation criteria and assess

screening to be conducted with as little

constraints. The criteria to evaluate potential

effort as possible.

fare models should reflect what the PTA wants
to achieve with the fare model. As mentioned,

3. Perform initial screening of fare modela fare model is not fit to solve all problems

elements. This Report has discussed some pricein a transport system, and the PTA should be

drivers and adjustment factors, but significantly

clear about its ambition. Given the wide impact

more options are possible. In the initialof public transport, there could typically bescreening, the first long list of relevant priceupward of 20 criteria to asses the fare models,elements should be reduced to a manageable

ranging from user friendliness to flexibility

number to evaluate in detail. The constraints andfor political steering. The assessment criteria

a rough assessment of the evaluation criteria areshould therefore be prioritized to ensure

guiding factors in this phase.

efficient evaluation.

Figure 6. Design process
Figure 6. Design process
1

2
AS-IS
ASSESSMENT• Consider goals toachieve using
pricing & farestructure as tool

• Develop
evaluation
criteria, given
goals• Assess current
model• Map constraints
in transport
network–

Pros tomaintain–

Weaknesses
to improve

Source: Arthur D. Little

16

EVALUATIONCRITERIA &CONSTRAINT

34

COMPLETE
PRICE
MODELSINITIALSCREENING• Perform
screeningat high level toreduce pool ofpotential factors• Develop
complete pricemodels forassessment–

Price drivers–

Adjustment
factors

5

ANALYSIS &EVALUATION• Analyze &evaluate
performance–

Completemodels–Individualcomponents

ARTHUR D. LITTLEADL HAS DEVELOPED A
FIVE-POINT FR AMEWORKF O R P TA s T O D E S I G N
T H E B E S T FA R E M O D E L

5. Analyze and evaluate price models. PTAs
should employ a combination of qualitativeand quantitative methods to evaluate
the combined price models. A transportmodel is a highly valuable tool to assess thequantitative effects. Using historic travel
data from the transport system combinedwith elasticity assumptions, PTAs can predict

4. Develop complete price models. In order toproperly evaluate fare model elements, PTAs
must assess them in the context of a complete
price model. At the same time, evaluating pricemodels in detail is a time-consuming activity,
so to limit the effort needed, PTAs must
develop complete and precise price models.
With the correct assembly of price models,

the quantitative effects of the user’s travel
patterns due to different price models. If
price elements in complete price models
are accurately combined, the impact of eachindividual element can be seen. Based on thisanalysis, PTAs can assess the best combinationof elements and create the ideal fare model forthat specific area of operation.

a PTA can assess the impact of each relevant
element individually.

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R E P O R T: P U B L I C T R A N S P O R T FA R E M O D E L S

CONCLUSION

The evolving landscape of public transport
has brought forth challenges in funding andoperational costs. A public transport faremodel should align with the mobility system’s
objectives, capabilities, and limitations.
Despite regional differences, PTAs globally

ALL PRICE DRIVERS AND
A D J U S T M E N T FA C T O R S
COME WITH BENEFITSAND DOWNSIDES

share common goals: to make mobility
more environmentally friendly and offer
straightforward, secure, and reliable travel in an
efficient manner. Achieving these goals requires
striking a balance with operation costs andpublic funding for services.
As we have illustrated in this Report, all pricedrivers and adjustment factors come with
benefits and downsides. In addition to thegeneral characteristics, factors can be designed
to increase or decrease the effects by changing
things like price levels, zone sizes, or distance.
The effects can also be enhanced or canceleddepending on what factors are combined. This
results in a wide selection of considerations for
PTAs when designing their fare model.

18

Our five-step framework guides PTAs during
the process as they:
1. Assess current model.
2. Develop evaluation criteria and constraints.
3. Perform initial screening.
4. Develop complete price models.
5. Analyze and evaluate models and factors.
Using this framework will enable PTAs to design
the fare model that works best for their public
transport needs.

ARTHUR D. LITTLE

NOTES

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