Fares for domestic long-distance passenger services vary by age (adult and children fares, based on rate components) depending on the train category (branded express; express; branded passenger; passenger), carriage type (luxury, first-class, compartment, third-class, open-plan seating), travelling distance, and seasonal coefficients set out in the flexible tariff regulation schedule and are consistent throughout the Russian railway network.
Under regulatory documents (Tariff Guidelines, approved by Russian Federation Federal Tariff Service (FTS of Russia) Decree No. 156-т/1 dated 27 July 2010), domestic fares for third-class and common carriages are regulated by the state, represented by the FTS of Russia.
Pricing flexibility in the regulated segment was only provided under the Flexible Tariff Regulation Schedule set by the FTS of Russia on an annual basis. No discounts or marketing promotions were available, and this greatly constrained demand management in a changing macroeconomic environment.
In 2015, pursuant to Russian Federal Tariff Service Decree No. 280 т/1 dated 5 December 2014, FPC was for the first time authorised to use flexible ticketing for third-class and common carriages, with the price determined by the location of seats. The price differentiation of tickets for various seat categories in third-class carriages made train fares more affordable to various consumer categories. The Company does not plan to increase fares in this segment as the upper limit of the tariff range is set in the Tariff Guidelines and the flexible tariff regulation schedule, and is adjusted for a service category coefficient.
Discounts off the price of third-class carriage tickets have been offered since February 2015, when the price differentiation was available for 14 train services only. The Company gradually expanded the new pricing approach to include 50 train services in April 2015 and another 130 train services in September, with all long-distance domestic trains covered in October.
At the same time, under item 5 of the List of Services of Natural Rail Monopolies with Regulated Fares, Fees and Charges, as approved by the Russian Government’s Resolution No. 643 On Government Regulation of, and Control Over, Fares, Fees and Charges for Services of Natural Rail Monopolies dated 5 August 2009, FPC may set the prices of fares for first-class and compartment carriages at its own discretion.
In the deregulated segment, FPC provides passenger services in compartment carriages, high-speed interregional, first-class and luxury carriages.
The deregulated segment also covers tourist and commercial services.
In this segment, FPC may set the prices of passenger fares at its own discretion.
To reinforce its positions in the passenger services market the Company has been running marketing promotions since its inception to stimulate consumer demand in the deregulated segment and boost its revenue. Since March 2013, FPC has been phasing in a dynamic pricing system.
The dynamic pricing system is the most flexible tool ever used by the Company. It is a powerful combination of most approaches previously used as marketing promotion tools: pricing depending on seat/berth category (upper or lower berth); day of the week; booking date, etc. Unlike static marketing promotions where the rates are set in advance for a long period of time, the dynamic pricing system offers flexible automated ticketing that takes into account internal changes and various external trends as at the ticket selling date.
The price of a fare varies depending on multiple factors and nuances that need to be taken into account when buying a ticket:
For all train services covered by the dynamic pricing system, tickets can be bought from the first day of sale. The pricing policy varies by destination, train and route leg.
As tickets get sold, and the destination date draws nearer, fares for the main route leg grow higher. At the same time, the fare at different route legs may vary disproportionally. In case of high demand, the fare for a certain route leg may get closer to the main route leg fare. Discounted fares may apply to low-demand routes or trains (through to the departure date). This policy is applied if demand declines below the projected level.
In certain cases, the fare varies not only by season and day of the week, but also by time of the day. E.g., most passengers plan their trips for Fridays to return on Sunday evening after spending the weekend at their destination. Accordingly, the number of cheaper tickets for Friday night and Sunday night return trains would be limited.
Discounts get much larger in low seasons, e.g. after New Year holidays. Those are the periods when the lowest fares apply. In high seasons (holidays or school vacations) when passenger demand is high, fares can get much higher.
As a rule, fares for trains departing about 04:00 a.m. to 05:00 a.m. are much lower than for later trains. Thus, if a passenger is quite tight on time, the ticket price will be much higher. It should be taken into account that demand is monitored by day of the week, which drives the pricing policy.
However, demand is the key pricing driver.