UP Express Fare Strategy. December 11, 2014

Transcription

1 UP Express Fare Strategy December 11, 2014

2 ii TABLE OF CONTENTS Table of Contents... ii 1. Project history Background UP Express and the Big Move Vision and mission UP Express Design Dedicated air rail link vs. commuter service Passenger Experience Research on Ridership Ridership and Market Demand Forecasting In-Scope Demand and Ridership Catchment Analysis Ridership profiles Peak Period Usage Capacity Price Sensitivity Research and Analysis Ridership Forecast Modeling Price Modeling and Fare Product Analysis Fare Price Sensitivity Global Benchmarking Potential Fare Product Analysis Fare Principles Principle #1: Build Ridership Principle #2: Reduce Car Use to/from Toronto Pearson Principle #3: Various Fare Products...21

3 iii 7.4. Principle #4: Fare-by-Distance Principle #5: Recovery of Operating Costs Fare Recommendations General Fare Products Volume Based Fares Special Fare Products Post-Launch Appendices Appendix A: ARL Comparison Appendix B: PROPOSED Full Fare Table Appendix C: UP Express Research Summary...30

4 1. PROJECT HISTORY 1.1. BACKGROUND Toronto s dedicated Air Rail Link (ARL), the Union Pearson (UP) Express, is launching in spring 2015 and will be owned and operated by Metrolinx. The project is currently ontime and on-budget, and when launched will run between Canada s two busiest transport hubs Union Station in downtown Toronto and Toronto Pearson International Airport (Toronto Pearson), with stops at Bloor and Weston Stations. Exhibit 1: UP Express Route Map The concept of a dedicated ARL was originally developed in 2000 as a public-private partnership and was facilitated by Transport Canada in 2002, when it tendered a Request for Business Case soliciting bids from P3 developers to give the winning bidder the right to develop the ARL project. From 2002 through to 2009, the private sector worked on the design of the infrastructure and the original business model to develop it further into a dedicated airport link, as it was an instrumental part of the bid for the Pan/Parapan Am Games in However, in 2009, the private sector pulled out of the

5 - 2 - process due to the global economic downturn, fearing it would be unable to raise the financing needed to deliver the project. At that time, the Ministry of Transportation and Metrolinx assessed the feasibility of taking over the responsibility for this project, and by 2010, the Ontario Government reassigned the responsibility of the project to Metrolinx. Since then, the project has been re-configured to be delivered in three phases: The Plan and Design Phase (mid-2010 to mid-2012), the Build Phase (mid-2012 to March 2015), and the Operate Phase (April 2015 onwards) UP EXPRESS AND THE BIG MOVE The Metrolinx Regional Transportation Plan, The Big Move, identifies the need to establish a dedicated link from downtown Toronto to Toronto Pearson. More specifically, Big Move #2 stipulates the need for the development of high-order transit connectivity to the Pearson Airport district from all directions, including a multi-purpose, fast transit link to downtown Toronto... 1 By 2031, passenger traffic at Union Station is expected to grow from 65 million to 130 million. At the same time, passenger traffic through Toronto Pearson is expected to grow from 36 million to approximately 60 million travellers annually. By 2020, the number of cars travelling between downtown Toronto and Toronto Pearson is expected to increase from 5 million to 9 million a year. The unpredictability caused by traffic, weather, construction and road closures is the biggest concerns for travellers when it comes to getting to and from the airport. The development of a dedicated ARL will help accommodate that growing influx and provide certainty to the time-strapped traveller. With its frequent and predictable service, UP Express will play an important role in helping to reduce downtown to airport automobile trips (and the related greenhouse gas emissions they produce), and will also contribute to a global recognition of Toronto a World Class financial and tourism centre. 1 Source: The Big Move Regional Transportation Plan, 2008

6 VISION AND MISSION As a dedicated ARL, UP Express is guided by: Vision We will be an undeniable symbol of Ontario's progress and prosperity, and of Toronto s role on the world stage Mission To transform the way people travel to and from downtown Toronto to Toronto Pearson and elevate the way they experience our city UP Express will also provide positive intangibles to passengers by ensuring that service is: Value Description Efficient Economical Environmental Differentiated Service every 15 minutes; and a 25 minutes total journey time Priced competitively with other airport transportation providers Less than half the cost of a taxi or airport limo State of the art Tier 4 diesel; the cleanest diesel option available Remove up to 1.2M cars off the road in the first year of operation Differentiated experience with comfortable seating, Wi-Fi, onboard washrooms, check-in kiosks, infotainment Elevating Toronto; joining the ranks of other global cities UP Express has ambitious goals, but as a key part of the GTHA transportation landscape mapped out in The Big Move 2, it is important that the core operational and passenger experience elements of the service ( particularly the delivery of the value proposition), are in place for launch. With this vision and mission in place, UP Express will transform the way people travel to and from 2 Source: The Big Move Regional Transportation Plan, 2008

7 - 4 - Toronto Pearson. More specifically, UP Express is envisaged to: Provide an air rail service characterized by a differentiated customer-centric experience tailored to the needs of travellers that is unprecedented in North America; Alleviate an uncertain and stressful travel experience for local residents and visitors by providing a predictable, high speed rail service that will depart from each station every 15 minutes and will take 25 minutes to get from Union Station to Toronto Pearson; Contribute to economic growth in the Greater Toronto and Hamilton Area (GTHA) and build the region s reputation as a global centre by providing a highly efficient, fast and smooth connection between Toronto s financial district and the rest of the world; Contribute to easing traffic congestion by eliminating upwards of 1.2 million car trips within the first year of operation; and Stimulate tourism by making travel to and from Toronto more appealing UP EXPRESS DESIGN From the start of this project in 2000, UP Express has been guided by the need to provide a dedicated airport rail service for customers travelling through Toronto Pearson International Airport (Toronto Pearson). As such, the service was designed to bring passengers directly into the airport terminal area. The conceptual design that was adopted by the Province in 2010 included previously completed work at Terminal 1 specifically built for the UP Express station (connected to the existing LINK People Mover station at Terminal 1). The design included a welldefined 3.2 kilometre spur alignment that Exhibit 2 Spur Path and Elevation would connect the Terminal 1 Airport Station to the Kitchener Railway Corridor, enabling UP Express trains to navigate through the airport above existing infrastructure. Given the very tight nature of the design, the UP Express Pearson Terminal station and Spur line are specifically placed and have their physical characteristics and limitations.

8 - 5 - For example, the spur runs above existing road infrastructure so that it can land near the Terminal, with the station connecting directly to Terminal 1. This is an achievement that could only have been done in short order and within a reasonable budget. There were no other options to reach the terminal efficiently. The alignment of the Spur enabled the positioning of the Pearson Terminal Station to be located between the Terminal 1 building and the LINK People Mover in order to enable for quick transfer for passengers going to Terminal 3. The combination of the station design and location and the spur line design will not allow for an expansion of the trains as the station was designed to handle a train with a maximum of three cars. In addition, the capacity of the system is fixed from a physical infrastructure standpoint at Pearson Station DEDICATED AIR RAIL LINK VS. COMMUTER SERVICE UP Express will be a dedicated ARL, A dedicated ARL is characterized as a direct rail service between an airport hub and a major urban centre that is designed to accommodate the needs of air travellers. As a result, the UP Express has been designed to: 1. Be delivered before Toronto hosts Pan/Parapan Am Games in 2015; 2. Be delivered within the allocated $456M capital budget; 3. Cater specifically to the needs of airport travellers Furthermore, UP Express is envisaged to be an extension of Toronto Pearson, where it will offer a comfortable and stress-free ride, with specialized services and amenities designed for air travellers including airline check-in kiosks, luggage racks, onboard Wi-Fi and up-to-the minute flight information. As a result, UP Express overall value will be in line with leading dedicated ARLs around the world, such as Stockholm s Arlanda Express, London s Heathrow Express, Oslo s Flytoget Express and Tokyo s Narita Express. (For a comprehensive list of globally recognized ARLs, please see Appendix A for listing by type, ownership and subsidy status.) Bearing in mind the overall value of UP Express as an ARL, it becomes clear that the level of service offered is distinctly different from commuter rail services designed to carry daily commuters. Exhibit 3 outlines the major differences between ARLs and Commuter Rail Services.

9 - 6 - Exhibit 3: Comparison of ARLs vs. Commuter Rail Services UP Express carried out extensive research to determine the optimal passenger experience, which in turn informed the proposed UP Express fare structure. 3. PASSENGER EXPERIENCE In August 2011, Metrolinx investigated leading practices of global ARLs to provide a high-level view of industry trends. While all global ARLs were examined, a deeper dive was specifically conducted on 21. Developments of leading ARLs have driven organizations to a crossroads between providing efficient transportation and exceptional hospitality. Globally, the most successful ARLs have been built on a foundation of operational excellence, and differentiate themselves by creating a customer-centric experience. Staff have divided this experience into nine touch points as outlined below in the Traveller Experience Journey). These points outline the experience from a customer s perspective, enabling us to focus on the key components of a truly customer-centric experience.

10 - 7 - Exhibit 4: Traveller Experience Journey At each touch point described above, global ARLs look to continually enhance the customer experience with new and innovative services. UP Express has leveraged some of these global best practices. In particular, UP Express will offer online, mobile, self-serve and onboard ticket options as a means to uphold the traveller experience across various touch points. The traveller experience lifecycle has helped inform the type of proposed fare products UP Express will offer, which will be discussed further below. 4. RESEARCH ON RIDERSHIP Research as to what UP Express might expect in terms of ridership has been conducted over the past five years to ensure that decisions, particularly around fare types and pricing, could be made based on a good foundation of current and factual data. Ridership research provided a perspective on the numbers and types of riders UP Express might expect. In particular, the results of this research were an understanding of projected market demand, ridership levels and profiles. Original ridership forecasts were completed between 2001 and 2009 for the private sector version of the project, including the earliest Transport Canada study prepared for the original project back in That study was the foundation subsequent research and was deemed at that time to be a bankable ridership study, generating confidence in the international financial sector that the project could be developed as a P3 type without the need for government guarantees.

11 - 8 - When the project was re-assigned to Metrolinx, UP Express commissioned a variety of studies from Steer Davies Gleave (SDG) and Deloitte from 2010 to Several of these studies provided updated and revised ridership forecasts. They have been analyzed and mapped against the Traveller Experience Journey, as well as and the Fare Principles, in order to make informed, value-driven decisions regarding the proposed fare products and prices that UP Express will offer. (To be discussed below.) 4.1. RIDERSHIP AND MARKET DEMAND FORECASTING In 2009, SDG undertook an Investment Grade Bankable Ridership and Revenue study in order to determine and forecast ridership levels and overall market demand. After becoming sponsors of the project, in 2011 Metrolinx commissioned SDG to update these forecasts under a number of new operating assumptions related to population, employment growth and competing modes. This study also utilized the latest passenger growth data from Toronto Pearson. A similar update was conducted by SDG in IN-SCOPE DEMAND AND RIDERSHIP CATCHMENT ANALYSIS The SDG forecasting methodology is based on a framework that is widely accepted throughout the transportation industry. This approach is commonly used to estimate potential demand for toll roads, urban transit systems and rail networks. It relies on answering two significant questions: 1. In-scope market: How much of the total travel market between Toronto Pearson and the GTHA can reasonably be attracted to the UP Express? 2. Traffic capture: How much of this in-scope travel can actually be captured? Independent air traffic forecasts for Toronto Pearson were developed by SDG by first forecasting the air traffic growth for the GTHA, and then separating out the Toronto Pearson passengers from those of Billy Bishop City Airport and Hamilton Airport. Air traffic forecasts were developed by using a series of drivers, including: Information at a flight sector level (the type of flight): trans-border, domestic and international; Historical trends in air traffic; GDP forecasts; Cost of air travel; Likely changes in airline strategy, particularly reflecting the activities of Porter Airlines at Billy Bishop; and Capacity constraints at each airport. Air traffic out of Toronto Pearson is summarized in Exhibit 5.

12 - 9 - Exhibit 5: Air Traffic Forecasts (SDG 2013) Annual Toronto Pearson Air Traffic (millions, inc transfers) This exercise concluded that by 2030, close to 50 million passengers are expected to be utilizing Toronto Pearson. By identifying the air traffic at Toronto Pearson, SDG was able to identify the size of the in-scope market both in the UP Express opening year and into the future. (See the Exhibit 6 below.) Exhibit 6: In-Scope Demand in 2020 Some groups of passengers were removed from the total air traffic estimations. Those remaining are termed the in-scope demand. Those discounted for the purposes of assessing in-scope demand are: Transferring passengers who are changing planes and therefore do not leave the airport;

13 Those travelling at times outside of the proposed hours of operation for the UP Express; Passengers travelling using modes of transport from which it would not be logical to switch, such as dedicated hotel shuttles; and Those travelling from areas outside of UP Express primary catchment zones, such as from Mississauga or Brampton, where their current mode of travel would remain advantageous. UP Express will be one of multiple airport transportation options, and will supplement existing transportation methods per the exhibit below. Exhibit 7: Comparison of Transportation Options to and from Toronto Pearson Service Fare Benefits Limitations Duration Limo ~$70 Taxi ~$60 Airport Express (No longer in service as of Oct. 2014) GO bus and TTC subway (Regional Commuter + Local Transit) ~$28 ~$8 Door-to-door service Comfortable spacious seating Assistance with baggage Door-to-door service Assistance with baggage Affordable alternative to a taxi Comfortable seating Wi-Fi, laptop plug ins Onboard washroom Frequent subway departure Customers can use existing passes Traffic Traffic Unpredictable Limited frequency Multiple hotel stops Traffic Limited frequency of bus Multiple stops minutes +10min wait time On demand minutes +10 minute wait On demand minutes minute frequency minutes 60 minute frequency TTC (Local Transit) ~$3 Frequent train and bus departure Customers can use existing passes Traffic Multiple stops Limited comfort minutes 10 minute frequency

14 In conclusion, the in-scope demand in 2020 is 11.9 million. Of the 11.9 million, SDG estimated capture rates of passengers who could potentially be diverted to use UP Express for their airport travel, shown graphically in the exhibit below. SDG utilized various survey and analytics to determine the size and demarcation points of each of the catchment areas. Exhibit 8: Capture Rates By Area in Downtown Toronto Per Exhibit 8, passenger demand for UP Express varies across different areas of Toronto. The highest numbers are sourced from the downtown areas and the area closest to Union Station in particular, where the UP Express station can be accessed by foot. For the area immediately around Union Station (zone 101), 60% of the overall inscope market is captured by the UP Express. The downtown area (zones 101 to 112) accounts for 73% of the forecast demand for the UP Express. By analyzing the catchment areas from the number of in-scope demand passengers, SDG further layered on data generated from the Deloitte-Ipsos Discrete Choice Survey, which examines how sensitive potential travellers are to certain price points depending on the station of origin or destination RIDERSHIP PROFILES Market Segments As noted in the above section, SDG utilized a series of survey data to determine the potential ridership profile within the catchment areas and in-scope demand passengers.

15 Exhibit 9: Resident Split Exibit 10: Business vs. Leisure 60% 40% GTHA Non-GTHA 45% 55% Business Leisure Through this analysis, SDG was able to determine the resident split and projected business versus leisure. 3 In addition, UP Express studied global ARLs and learned that their actual ridership profiles were similar to these projections. For example, Heather Express customer profile is 69% business and 31% leisure. Further, Flytoget s customer profile is 67% business and 33% leisure. Exhibit 11: ARL Ridership Demographics 31% 33% 45% 45% Leisure 69% 67% 55% 55% Business Heathrow Express (London) 60% Flytoget (Oslo) 40% Sydney Airport Link UP Express 3 Source: SDG Ridership Forecast 2013

16 From this analysis, UP Express was able to identify the type of riders that would potentially use the service, which in turn would help determine the type of proposed fare products UP Express will offer. Airport Employees Airport employees represent a strong user market for UP Express in that their projected frequency of usage is significantly greater than the average airport traveller. They also have significant influence over ground transportation decisions with over 50% making recommendations to airport travellers. 4 In 2013, UP Express worked with Northstar Research to conduct in-depth research on airport employee commuter habits. Much of this research was focused on understanding airport employee price sensitivity and the costs of existing modes of transportation. Findings revealed that the majority of airport employees drive to work, with many having to also pay for parking. Exhibit 12: Airport Employee Main Method of Travel To/From Pearson Drive/Drop off 61% TTC 30% Airport Express Bus Other Taxi GO Bus MiWay 3% 3% 1% 1% 1% The UP Express was shown to be an attractive alternative to driving as it would be significantly faster during rush hour to and from downtown Toronto. More specifically, it was found that the majority of employees would utilize Bloor station in order to get to and from Toronto Pearson. In addition, UP Express also examined global dedicated ARLs and found that the majority of them offer some form of airport employee program. 4 Source: Northstar Airport Employee Survey, 2013

17 Meeter and Greeter In October 2014, UP Express worked with Northstar Research to further understand the potential ridership profile of those wishing to use UP Express in order to meet and/or greet Toronto Pearson air travellers. Northstar issued an online survey to determine this ridership profile, which found that 60% of all respondents were in favour of using UP Express for the purposes of meeting and/or greeting someone at Toronto Pearson. This insight has proven to be of value for UP Express, as it informed the Meeter and Greeter ticket product. Long Layover Based on research and analysis provided by the GTAA, analysis done by Deloitte and best practice research with other ARLs in 2013, UP Express explored the ridership profile of potential travellers who would be spending six or more hours at Toronto Pearson as a result of a long layover between flight connections. The results showed that 1% to 2% of total annual ridership would comprise of long layover travellers. In addition, long layover information shared from the air rail link in Kuala Lumpur indicated that 1.7% of their total annual ridership was for long layovers. This in turn helped informed the long layover ticket product. 4.4 PEAK PERIOD USAGE SDG provided UP Express with forecasted ridership by time of day based on the daily variation in air traffic and separation of arriving versus departing passengers. This forecast excludes passengers who are transferring, but includes both weekends and weekdays. The key findings of the forecasting study were that the volume of: Arriving passengers peaks in the afternoon between 15:00 and 19:00, with a small dip at 17:00. The period between 15:00 and 19:00 accounts for just under 40% of the arriving daily passengers; and Departing passengers show two peaks: one in the morning between 08:00 and 10:00, accounting for ~20% of the daily departing passengers, and a second peak in the afternoon between 17:00 and 18:00, accounting for a further ~15%. The quietest times across the day for both arriving and departing passengers occurs in the early morning between: 03:00 and 04:00 for those arriving; and 02:00 and 05:00 for departures.

18 Variations in air traffic across the day are an important component in determining the hours of operation for the UP Express service, and can be seen in the exhibit below. Exhibit 13: Daily Trends in Ridership Traffic SDG In conclusion, the ridership research described in this section provided UP Express with an understanding of: In-scope demand (including catchment areas), which informed potential market and market size; Ridership forecast modeling, which informed price sensitivity; and Peak periods, which informed capacity estimates. These findings were used by UP Express to implement price modeling exercises. 4.5 CAPACITY The trains that will provide the service are designed to operate in the existing railway infrastructure and meet strict railway design requirements. The interior of the vehicles are designed to maximize seating capacity and are not intended to accommodate crowding passengers. The aisles of the trains are required to remain unobstructed for staff to move through the vehicles to validate tickets and serve passengers. If overcrowding occurs, the overall comfort level of all passengers could decrease and make it difficult for seated passengers to see their luggage in the luggage rack areas (a common requirement in airport dedicated rail cars due to personal property security concerns).

19 Seating per train ranges from 113 to 173, depending on how the train is configured. Trains can be configured in two or three car sets, with a three car per train maximum length. Based on the daily hourly forecast, primarily derived from the arrivals and departures at Pearson Airport, UP Express is expected to carry a large portion of passengers during the morning and evening peak hours. In addition, UP Express has planned for capacity fluctuations by time of day, time of year and future growth. As shown in the SDG capacity research, daily ridership fluctuations are fairly minimal, making off-peak discounting less feasible as a potential fare incentive tactic. Given the nature of the service, UP Express travel patterns will mirror those from air travellers and are differentiated from local commuter travel patterns. Exhibit 14: Crowding Simulation (1 Car of UP Train at Standing Capacity with Luggage) As previously described, there is an expectation that at the start of service, UP Express would generate less passenger traffic than at its mature state in This means that 65% of the normal ridership is expected in year one of operation, as is typical with any new start-up project. UP Express is projected to reach ridership growth maturity three years after service launch (by 2018), which is a standard ramp-up rate. Recent studies have shown that if there is anticipation for this service, the ramp-up period may be shorter and ridership may reach maturity much sooner than projected. Planning is therefore focused on ensuring that there will be enough capacity in 2018 when market demand has matured. Three year ramp-up assumptions are common in transportation modeling, given the time it takes for awareness to build and for travellers to shift from their previous modes.

20 PRICE SENSITIVITY RESEARCH AND ANALYSIS In May 2012, Deloitte-Ipsos conducted a Discrete Choice Survey in order to test the price sensitivity of potential UP Express customers and the value proposition of seven service attributes. Findings aligned closely with the SDG ridership forecast relating to price sensitivity. As the price for UP Express goes up, the demand for usage of UP Express goes down at a fairly consistent rate, as shown in the exhibit below. SDG applied this sensitivity data to the in-scope demand and catchment area analysis in order to derive ridership forecast modeling. This in turn helped determine further ridership analysis, such as peak and off peak ridership RIDERSHIP FORECAST MODELING SDG examined the impact on ridership based on various price points by station. A Union/Bloor/Weston, $30/$25/$20 fare structure projected an annual baseline ridership of 2.46 million passengers in 2020, which is further identified in Exhibit 15. This forecast assumed all passengers were adult travellers and did not include additional ridership segments, including seniors, students, children, and airport employees. This ridership modeling further helped SDG identify the travel characteristics of the potential travellers using the service, which in turn helped further inform further pricemodeling, which will be discussed further below. Exhibit 15: Market Size Toronto Pearson (~40M) Inscope (~11.9M) Base forecast (~2.5M) 6. PRICE MODELING AND FARE PRODUCT ANALYSIS This section explains how UP Express modeled various price points for the proposed fare products in order to determine the products and prices that will be offered at launch. While the ridership forecasting data provided insight to various price modeling exercises, price modeling and product analysis was further informed by capacity constraints (such as the layout of the train) FARE PRICE SENSITIVITY UP Express evaluated the financial impacts associated with a variety of different price points in order to examine the impact on revenue and cost recovery. Research conducted by SDG, Ipsos and Deloitte provided UP Express with data and insight into the ridership impacts associated with offering various fare price points by

21 station by year. This included stated preference surveys, airport origin-destination surveys and standard methodologies for forecasting ridership in transportation systems. UP Express used this pricing/ridership forecasting research to model the financial impacts associated with various fare prices that would contribute to operating cost recovery. Financial forecasting was developed by examining elasticity by station by year, using lines of best fit from the SDG data tables. This provided baseline ridership and revenue estimates. From there, the financial impact associated with offering concessions and new fare products, such as the airport employee discount program, was taken into consideration GLOBAL BENCHMARKING UP Express conducted numerous pricing research exercises, including benchmarking prospective prices for various UP Express fare types against other worldwide ARLs and transit services that travel to the airport (see Appendix A). These benchmarks and the traveller experience lifecycle helped form the Fare Principles that UP Express will abide by POTENTIAL FARE PRODUCT ANALYSIS UP Express also examined the ridership impact related to new fare products, various price points and concessions. New fare products include round trip discounts, senior/student/child/family concessions, volume discounts, on-board payments, the airport employee discount program and meeter & greeter/long layover ticket types. Some of these fare products are anticipated to have a positive net benefit on revenue (as they attract new markets), while others are anticipated to have downward pressure on revenue, such as those offering fare class concessions. Exhibit 16: Fare Products Airport employees Concessio n discounts Meeter & greeter PRESTO discounts Base forecast demand Long layover Volume discounts Roundtrip products Concessions new Fare Classes SDG forecasts did not factor in concessions to seniors, students, families and children. UP Express has benchmarked these concessions against other global ARLs and local services, including GO Transit, TTC and VIA Rail, and plans to follow general discounting precedents that have been set.

22 These discounts bring the weighted average fare price down by approximately 20%, which would contribute to additional uplift in ridership and downward pressure on revenue. Round trip Products Informed by Deloitte-Ipsos Discrete Choice research, UP Express assessed the demand for a discounted round-trip ticket product across all concessions (except for families). UP Express discovered that there would be considerable demand for such ticket products, which in turn further informed the proposed fare products to be offered for launch. PRESTO PRESTO cardholders will be able to use their PRESTO card to travel on UP Express. The PRESTO regional fare card system offers discounts to frequent users across a wide variety of transit service providers in the GTHA and Ottawa. Meeter and Greeter For passengers travelling to pick up or drop off their family or friends at the airport, UP Express proposed to offer a reduced fare product called Meeter and Greeter. This fare product would allow a traveller to travel to the airport and back for the price of a oneway fare (within a three hour window). This fare product is anticipated to attract additional ridership and revenue. Long Layover For connecting passengers looking to see the city while waiting for their next flight, UP Express proposes to offer a long layover ticket type. This would allow riders to travel from Toronto Pearson to downtown and back in the same day (six hour window) for a reduced fare. This fare product is anticipated to attract new ridership and revenue to a small segment of travellers that would otherwise not leave the airport while on layover. Volume-Based Discounts UP Express is proposing a dedicated program in order to cater to high volume customers. This program would offer discounts to corporate partners, access to travel management software, and support from a dedicated business development team. UP Express projects that these focused activities could lead to increased ridership. Current estimates are based on market size and market capture, and are conservatively set at 2% of total ridership.

23 Onboard Tickets UP Express will be charging an additional fee of $2 to passengers wishing to purchase tickets on board the train. This purchase channel is a valuable feature for those travellers who are pressed for time and do not have a chance to purchase a ticket online or from a ticket vending machine or service desk before reaching the train. As a benchmark, Heathrow Express has considerably more expensive onboard payment fees, but the method currently accounts for 7% of payments. For revenue modelling purposes, UP Express has used a very conservative 2% onboard payment projection, contributing additional revenue and helping to offset pricing discounts offered in other areas. Airport Employee Program As part of baseline modelling of the airport employee population and review of best practices, UP Express planned an airport employee discount program. This program is anticipated to add incremental ridership and revenue. Without this type of program in place, it is assumed that few airport employees would use UP Express for getting to work. 7. FARE PRINCIPLES To ensure the UP Express service is comparable to the leading ARLs in the world, staff developed six fare principles. These principles focus on traveller experience, balancing air traveller demand with vehicle capacity and fiscal responsibility. They are as follows: Principles Descriptions Build Ridership Fares should be set to build ridership. UP Express should be competitively priced to Reduce Car Use to and from encourage use by people who would otherwise Toronto Pearson travel by car, taxi or limousine. Committed to variable fares for children, senior Various Fare Products and family pricing, as well as airport employees and bulk fare purchases. Fare-by-Distance Travellers should pay fares based on the station they travel to/from. Subject to ridership at launch, the business Recovery of Operating Costs plan should assume fare box recovery within 3 to 5 years. The section below provides more detailed descriptions for each principle.

24 PRINCIPLE #1: BUILD RIDERSHIP Fares should be customized to reflect travellers needs, and if travellers see the strong value proposition for using UP Express, ridership will build. Examples of creating a strong value proposition include providing discounted rates for riders who travel as a group (e.g., Family fare). The overall goal is to allow ridership to grow to a level at which utilization of the service is as close to 100% as possible in peak periods PRINCIPLE #2: REDUCE CAR USE TO/FROM TORONTO PEARSON Fares should be competitively priced with transportation alternatives between downtown and Toronto Pearson. Riders who are looking for reliable, frequent transportation to or from Toronto Pearson will find that UP Express may be a more appealing option than the alternatives, particularly in high-traffic times. UP Express should reduce car trips, benefitting both road congestion and the environment PRINCIPLE #3: VARIOUS FARE PRODUCTS Committed to providing variable fare products based on travellers needs. Fare products vary by factors such as the method of payment, the age of travellers, the number of riders travelling together and the volume of tickets being purchased. Please see Section 8 in this document for the full list of fare products and eligibility requirements PRINCIPLE #4: FARE-BY-DISTANCE Fares should vary depending on the distance travelled to and from the airport, with shorter distances costing less than longer distances. This principle promotes a userbased pricing model, where the users of the service are the ones who pay for it PRINCIPLE #5: RECOVERY OF OPERATING COSTS UP Express is striving towards 100% fare box recovery of all operating costs by being financially responsible and leveraging Metrolinx infrastructure and shared services. The objective is to become self-financing within 3 to 5 years, while providing an excellent traveller experience. 8. FARE RECOMMENDATIONS UP Express has designed fares and fare products to be intuitive, convenient and seamless. Fare products cater to the needs of both business and leisure travellers. This section of the report will discuss the general fare products, volume-based fare products and special fare products, in addition to the various proposed price points.

25 GENERAL FARE PRODUCTS The recommended UP Express fare structure includes a range of discounted prices for travellers including residents, families, children, airport employees and for passengers getting on/off at Bloor and Weston. At launch, the proposed regular one-way adult fare between Union Station and Toronto Pearson is $19.00 with a PRESTO card, or $27.50 fare without a PRESTO card. The following are the proposed fare products that will be offered on UP Express: Category Definition Discounts Requirements Adult Riders who are between the ages of 20 and 64, and do not qualify for discounted fares Regular fare Child Riders who are between the ages of 6 and 12 years 50% discount from Adult fare Must provide Proof of Age Identification upon request. Minor Riders under the age of 6 Free Student Riders who are between the ages of 13 and 19 years 15% discount from Adult fare Available online/mobile, paper tickets at the stations or via PRESTO. Senior Riders over age of 65 Family Up to two riders 18 years of age or over, accompanied by up to three riders under the age of 18 Up to 56% discount Only available online/mobile and paper tickets at the stations. Not available via PRESTO Meeter & Greeter Long Layover Return trip within three hours originating from Union, Bloor or Weston stations Return trip within six hours originating from Toronto Pearson ~50% discount off the price of Adult round-trip fare Must use a return ticket within three hours of initial validation. Available for tickets purchased online only. Must use a return ticket within six hours of initial validation. Available for tickets purchased online only.

26 The following table includes the proposed fares for consumers: Please see Appendix B for the full fare table VOLUME BASED FARES The proposed fares in this category provide a discount for airport employees and other volume-based fares designed for group travel. Qualified airport employees will receive deep discounts, such as a one-way fare of only $10 between Union Station and Toronto Pearson. (That s half the PRESTO card price for an adult fare.) Qualified airport employees who need to use UP Express more frequently will also be eligible for an unlimited monthly pass for only $300. For the person who travels to work and back five days a week, this will average only $7.50 each way - that s 60% off the PRESTO card price for an adult fare. The monthly pass may also qualify for the transit tax credit, just as the TTC Metropass does. This will mean even more savings for qualified airport employees. UP Express is planning to continue discussions with unionized airport employees as well as the GTAA on how best to implement and continue to improve the UP Express airport employee program. The group travel rates are still being determined, but are expected to appeal to organizations that have considerable business travel (e.g., the GTHA region is the third largest North American financial services centre after New York and Chicago). They will also be available to travel aggregators/agencies and will include UP Express in their offering to hospitality and tourism events including conventions.

27 Category Definition Discounts Requirements Airport Employees Single Ride (from all stations) Monthly Unlimited Travel (from all stations) $10/ride $300/month Must have a valid Toronto Pearson identification card. Corporate and Group Tickets Eligibility requirements to be confirmed Pricing to be determined Must contact UP Express in advance of their trip and/or register online at and purchase group tickets and/or corporate ticket sales SPECIAL FARE PRODUCTS The following proposed fare products would be applicable to UP Express in order to ensure the service is intuitive, convenient, seamless and accessible: VIA Rail-UP Express Interline Tickets To make extended travel easier, VIA Rail passengers wishing to connect to the UP Express can purchase an interline ticket through VIA Rail. Interline tickets are tickets that can be used by travellers on multiple transportation systems. The interline ticket is an example of fare integration between UP Express and another service provider that offers seamless train travel beyond the GTHA. Tickets sold by VIA Rail will be available at the same fare as UP Express one-way paper and e-tickets without a PRESTO card. Accessibility (Support Persons) Riders who require physical assistance during their use of UP Express services may be accompanied by a support person who is capable of aiding such travellers, and/or a guide dog. Support persons are permitted to ride the UP Express free of charge when accompanying a fare-paying passenger requiring assistance. 9. POST-LAUNCH UP Express is expected to launch in the spring of 2015, and therefore in the immediate future will meet the Big Move #2 mandate to establish rapid rail connectivity to Toronto Pearson. As North America s first dedicated ARL, UP Express is hoping to be an

28 undeniable symbol of Ontario s progress and prosperity, as well as of Toronto s role on the world stage. Post-launch, UP Express will be monitoring the service to ensure that it is intuitive, convenient and seamless. Given that this is a new service entering the marketplace, staff will continue to evaluate the effectiveness of the fare structure to ensure that we are meeting the needs of our travellers..

29 APPENDICES APPENDIX A: ARL COMPARISON ARL City Operator / Parent Company Heathrow Express Arlanda Express London, UK Stockholm, Sweden Heathrow Express Operating Company Limited (Heathrow Airport Holdings) A-Train AB Flytoget Oslo, Norway Flytoget AS (Norwegian Ministry of Trade and Industry) Malpensa Express Leonardo Express KLIA Ekspres City Airport Train (CAT) Incheon Airport Railroad Express (AREX) Express Train Milan, Italy Rome, Italy Kuala Lumpur, Malaysia Vienna, Austria Seoul, South Korea Trenord Trenitalia Express Rail Link Sdn. Bhd (ERL) City Air Terminal Betriebsgesellschaft m.b.h (joint venture of Vienna Airport and Austrian Federal Railways) Korail Airport Railroad Co., Ltd. Narita Skyliner Tokyo, Japan Keisei Electric Railway Co., Ltd. Gautrain Airport Service Airport Express Metro Line Johannesburg, South Africa New Delhi, India Bombela Delhi Metro Rail Corporation Rhônexpress Lyon, France Rhônexpress

30 HK Airport Express Hong Kong (SAR), China MTR Narita Express Tokyo, Japan JR East Stansted Express London, UK Abellio Greater Anglia Gatwick Express London, UK Southern Railways (Govia, joint venture of Go-Ahead & Keolis) Aeroexpress Brisbane AirTrain Sydney Airport Link Shanghai Maglev Train (SMT) Bangkok Airport Rail Link Vladivostok; Kazan; Moscow, Russia Brisbane, QLD, Australia Sydney, NSW, Australia Shanghai, China Bangkok, Thailand Aeroexpress LLC Airtrain Citylink Limited Airport Link Company (Westpac) Shanghai Maglev Transportation Development Co., Ltd. State Railway of Thailand

31 Global ARL and other Modes of Transportation Prices

32 APPENDIX B: PROPOSED FULL FARE TABLE The table below depicts detailed baseline, roundtrip and non-pearson fares:

33 APPENDIX C: UP EXPRESS RESEARCH SUMMARY Date Project Vendor May-11 Update to ARL Ridership Steer Davies Gleave (SDG) Forecast Nov-11 ARL Market Assessment Northstar Jan-12 ARL Brand Mapping Level5 and Hotspex Jun-12 Air Rail Link Study Discrete Ipsos & Deloitte Choice Study Dec-12 Awareness Study (2012) Angus Reid Forum May-13 Update to ARL Ridership Steer Davies Gleave (SDG) Forecast Sep-13 UP Express Airport Northstar Employee Study Oct-13 UP Express Meeters & Northstar Greeters Study Dec-13 Awareness Study (2013) Angus Reid Forum