Rail ticket site Trainline (TRN) may have cleared a significant hurdle on 31 March with the news that it may only see a modest cut to the commission it derives from ticket sales but there is still one big unknown coming down the track which could knock it off course.

Its shares jumped nearly 25% on news that a proposed third-party licence deal with the new state-backed Great British Railways would reduce its commission by half a percentage point to 4.5%. A quarter of a percentage point would be offset by the removal of central industry costs.

At the current 246.5p Trainline is still 30% below the 350p price at which it floated in 2019. The pandemic hasn’t helped but market sentiment has also been soured of late by the May 2021 launch of GBR and the news it will become a central hub to sell train tickets online which poses a significant threat to Trainline’s market share.

Much will rest on whether Trainline is chosen to provide white label services to GBR in the same way it currently does to various train operators for their own sites. The tender commenced on 1 April and is expected to run for six months.

Winning this tender would provide some protection to Trainline’s business, though it would likely result in a hit to profitability if its own site experiences reduced transaction volumes and therefore reduced commission.

Even worse is a scenario in which GBR chooses another partner or takes the whole process in-house. It seems likely that as a government body, tickets sold through the GBR site would be cheaper as they could well be sold free of any commission.

Trainline is an established brand and may offer some innovative features, like flagging cost savings through splitting your journey into multiple tickets that cost less in total than one ticket for the whole route.

However, a new official ticketing site from GBR, likely to be heavily publicised and potentially offering cheaper fares, will test rail users’ loyalty to Trainline to the limit.

Liberum analyst Ciaran Donnelly remains convinced that, assuming the rail operators stop selling tickets themselves and consumers are faced with a straight choice between GBR and Trainline, the latter will prevail.

Donnelly says: ‘The most powerful defence any online platform has is its consumer relationship. It is the most difficult aspect to disintermediate, and we have seen challenger brands try to compete in other markets unsuccessfully, such as Rightmove (RMV) and Auto Trader (AUTO).

‘Similarly, Trainline has extensive experience competing in this space and has built and retained its market leading position.’

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