When there are limited barriers to entry for a business there are always risks as rail ticket seller Trainline is discovering to its cost today, lending credence to financier George Soros’ decision to short the stock through his UK investment arm.
When your potential competitor is the state the threat can be almost existential and the sweeping changes to the UK railway network which have been announced contain an important detail which is potentially devastating to Trainline’s business model.
The new Government-backed Great British Railways body is set to sell tickets in England and, while it won’t be set up for a couple of years, once it’s in place the plan is also to simplify the process of buying tickets.
“This has two implications for Trainline – potentially a lot of people will buy tickets from this new centralised body and if the previous labyrinthine ticket pricing system is made easier to navigate, the company will have less of a role in helping passengers find the best available price,” said AJ Bell’s Russ Mould.
“Innovations like offering people predictive travel information and telling them how busy services are may make some difference at the margin in maintaining loyalty to Trainline’s site but it is hard to believe it will be enough.
“The company now faces a two-year deadline to somehow preserve its relevance under the new set-up. It won’t be an easy task.”