Is it really that much of a hit that DB/Arriva can't afford it?
It's not a question of what Arriva can afford. It's about whether the DfT will agree to it.
Is it more cost effective to have cancelled services?
As far as the DfT is concerned, absolutely. It would be most cost effective of all if no trains at all ran (as often happens during a strike).
The railways are not cheap to run
No, and that's the problem. The Treasury isn't prepared to continue funding them as they have for the last 21 months.
I know that but you have to take a loss for the greater gain
Unfortunately the government refuses to act in a strategic manner. Short-term loss reduction is all they care about.
the rail fares are a premium rate for a premium service
The fares are certainly a premium rate; the service is anything but.
I can't see it making a big dent in their profits
In the grand scheme of things, it wouldn't make a big difference to the
losses that the railways make. But if you said that about everything...
it could help to ensure Arriva get the franchise renewal
It would make virtually no difference whatsoever. Unless they royally mess up (as Govia did on SE), they will continue to get extensions.
In this "brave new world" it's not for contracting TOCs to randomly decide to spend extra money. Everything needs DfT signoff.
Perhaps it's time to cull some of these railcards for maximum profit, the 25-30 railcard is ridiculous, I fall in to that category and can say there is no need for my my age group to have it, many people my age have had the chance to progress to management positions.
The 26-30 Railcard was a sop to try and convince Millenials the government cares about them. It's not going anywhere.
Perhaps we should axe the dirt cheap fares and focus on providing the premium service that forms the railway's unique selling point.
There are certainly some dirt cheap fares that I don't think will last, but the railway only provides a 'premium service' on a very small number of flows. In the vast majority of cases it offers a middling (at best) service and should be priced accordingly.