Campaign for Better Transport is fighting for cheaper train fares and a fuel tax on domestic flights. http://www.youtube.com/watch?v=IuX9O_MWWOY
This would start to make it easy for people to make the green choice.
We need your help to persuade the Government. Join the fight: http://www.bettertransport.org.uk/train-fares/
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The large difference between advance and walk-up fares isn't needed to balance out loadings, just a difference of fares between periods of high demand and periods of low demand, though a small discount for advance purchase well help judge what the demand is, and unexpected demand will result in a large increase in fares.
Whilst a large difference between advance and walk-up fares is somewhat unfair, if only a small number of cheap tickets are available this is not significant problem. It may be necessary to regulate air fares more as well to prevent destructive competition. Another major problem is that often walk-up single fares cost almost as much as walk-up returns.
What the average fares should be is another question.
Of course I agree that domestic air flights should be subject to fuel tax to level out the playing field. But on this page featuring Mystic Peg, CBT point out the differences between walk on and advance fares. Airlines have been doing this for ages. And it has helped Ryan Air and Easy Jet get seat occupancy on their flights very high, and reduce per passenger cost and per passenger carbon emissions. I obviously agree that walk on fares are very high but I don't know whether the rail fare structures should be further regulated when air fares are not.