East Coast rail franchise - ongoing discussion

[whole diary]

[didcotdean]

A question might be why it is that the East Coast seems the most problematic for a bidder to get 'right' compared to the others considering the relative number of failures and terminations of contracts over the years.

The relatively low percentage of season tickets amongst its users means it has an unusually low captive 'base load' of income but it can't be the only factor. Maybe the demand is quite elastic relating to price, so any attempts to increase the average price of Advances for example as has anecdotally happened just doesn't raise the expected additional revenue as people use other forms of transport.

[ChrisB]

What is being forgotten is that the bids & analysis were done on the basis that NR^» (Network Rail - home page) (a nationalised company, thus HMG really) would upgrade the ECML^▸ (East Coast Main Line) to allow additional services be run by the franchisee - thus additional revenue would be generated. NR now say this work is undeliverable in the promised timescale, thus it is HMGs default that has led to Stagecoach being unable to deliver promised returns to HMG.

No one can be sure that Stagecoach overbid, as the work needed to be done & the new improved timetable run to see if they did.

Also, Virgin only has a 10% interest in the East Coast - but a majority interest in the West Coast, where they are doing really quite well. I think we ought to be referring to Stagecoach/Brian Souter here, not Virgin/Branson.

[didcotdean]

As I understood from the material presented yesterday the issues had arisen earlier in the contract period before the lack of completed upgrades came into consideration. No doubt they would have made things worse later on. Supposedly the premium schedule was front- and back-end loaded, presumably with a lull whilst the works were ongoing.

It was noticeable that Stagecoach was the prominent name yesterday which may have had many scratching their heads with the public face having been Virgin.

[devonexpress]

What is being forgotten is that the bids & analysis were done on the basis that NR^» (Network Rail - home page) (a nationalised company, thus HMG really) would upgrade the ECML^▸ (East Coast Main Line) to allow additional services be run by the franchisee - thus additional revenue would be generated. NR now say this work is undeliverable in the promised timescale, thus it is HMGs default that has led to Stagecoach being unable to deliver promised returns to HMG.

No one can be sure that Stagecoach overbid, as the work needed to be done & the new improved timetable run to see if they did.

Also, Virgin only has a 10% interest in the East Coast - but a majority interest in the West Coast, where they are doing really quite well. I think we ought to be referring to Stagecoach/Brian Souter here, not Virgin/Branson.

Stagecoach did overbid, its why the franchise was cut back by 3 years in 2017. It was even stated so on the BBC^» (British Broadcasting Corporation - home page) News website.  Yes Stagecoach have the majority stake, but its the Virgin brand on the trains, website & station. Stagecoach are normally very competent at running trains i.e South West Trains so I can hardly see it is an issue with them.

The main problem is that the East Coast route is travelling to some poorer parts of the UK^▸ (United Kingdom), also regional airlines are taking a lot of passengers, being faster and cheaper. Myself I think the East Coast route should include Great Northern local services, and Northern services around York & Newcastle, allowing feeder services to better connect with high speed Kings Cross trains. As has and is being done on GWR^▸ (Great Western Railway), which has helped it increase revenue massively in the last few years.

[JayMac]

What is being forgotten is that the bids & analysis were done on the basis that NR^» (Network Rail - home page) (a nationalised company, thus HMG really) would upgrade the ECML^▸ (East Coast Main Line) to allow additional services be run by the franchisee - thus additional revenue would be generated. NR now say this work is undeliverable in the promised timescale, thus it is HMGs default that has led to Stagecoach being unable to deliver promised returns to HMG.

No one can be sure that Stagecoach overbid, as the work needed to be done & the new improved timetable run to see if they did.

Also, Virgin only has a 10% interest in the East Coast - but a majority interest in the West Coast, where they are doing really quite well. I think we ought to be referring to Stagecoach/Brian Souter here, not Virgin/Branson.

Stagecoach got into financial difficulty before most of the promised infrastructure enhancements were due to be delivered. Due later in Control Period 5 (2018-2019) and into Control Period 6 (from 2019 onward).

Stagecoach got their predictions wrong for the early years of the franchise, before there was ever an opportunity to run additional services to generate more revenue. They over bid, pure and simple. Blaming Network Rail is a smokescreen that doesn't stand up to scrutiny.

The following correspondence between the Transport Select Committee and Network Rail sheds light on what was promised and when it was due to be delivered. Franchise bidders were appraised of all aspects of proposed enhancements and the dates they were due.

http://www.parliament.uk/documents/commons-committees/transport/Letter-from-Chair-to-Network-Rail-re-East-Coast-Mainline-with-response-attached-15-01-2018.pdf

[Timmer]

Totally agree, NR^» (Network Rail - home page) can’t be held responsible for this one.

Wonder where this leaves First’s plan for their Open access London-Edinburgh service? Bit risky if you ask me.

[devonexpress]

Totally agree, NR^» (Network Rail - home page) can’t be held responsible for this one.

Wonder where this leaves First’s plan for their Open access London-Edinburgh service? Bit risky if you ask me.

I believe they only did that because they lost the franchise competition, the question is whether the government takes it into private hands until 2023, or keeps it until 2019, then puts out a new tender for the franchise.

[Western Pathfinder]

Andrew has been at it some more today !
So I'll just leave this here.
https://amp.lbc.co.uk/radio/presenters/james-obrien/lord-adonis-demolition-chris-grayling-devastating/.

[JayMac]

Some savings were made with the new website:

http://www.virgintrainseastcoast.uk/VTEC.htm

 

[Henry]

 I seem to remember a few year's back, correct me if am wrong, First Group were awarded the
 West Coast mainline franchise.
 
 Was there  an appeal by Branson that First Group's bid was 'unsustainable', or am I incorrect ?

[martyjon]

 I seem to remember a few year's back, correct me if am wrong, First Group were awarded the
 West Coast mainline franchise.
 
 Was there  an appeal by Branson that First Group's bid was 'unstatainable', or am I incorrect ?

Yes, FG were awarded the franchise. Branson appealed and if I remember rightly cited the DfT^» (Department for Transport - about) specification being inaccurate and so it proved and the award recinded. Probably was unsustainable and lead to FG handing back the keys but then, FG handed back the keys to the GW^▸ (Great Western) franchise when they FGW^▸ (First Great Western) were due to hand the DfT a slug of money as per the franchise payment schedule.

I forecast they would do that as when I looked at the figures and saw that in the 6th or 7th year of the Alison Forster franchise FGW were due to hand the DfT MORE than FG's TOTAL profits for the latest years accounts that were available at the time. I cant remember what year it was but remember the current GWR^▸ (Great Western Railway) franchise is an amalgamation of the original Great Western franchise, plus Thames Trains, later Great Western Link, and the west part of Wales and West Trains, later Wessex Trains.

[ellendune]

The difference between the East Coast incidents of 'handing back the keys' and FGW^▸ (First Great Western) was that in the FGW's case they merely exercised a break clause already written into the contract. Therefore FGW did not btreach its contract.  On East Coast NEX^▸ (National Express - parent company of Wessex Trains) and now, it appears, Stagecoach/Virgin are in breach of contract. 

[Chris from Nailsea]

From the BBC^» (British Broadcasting Corporation - home page):

Stagecoach East Coast deal to be probed by MPs^▸ (Member of Parliament)

The decision to end the East Coast Mainline rail franchise early is to come under scrutiny from MPs.

The Department for Transport has said Stagecoach and Virgin will withdraw from running the service within months after running into difficulties.

Now the House of Commons transport committee has announced that it will hold an inquiry into the matter.

Lilian Greenwood, who chairs the committee, said lessons needed to be learned from the failure.

Last week, Transport Secretary Chris Grayling said Stagecoach had "got its numbers wrong" and would continue running the London to Edinburgh line only for "a small number of months and no more".

He said the government might step in to run the service, adding that the day-to-day operation of the line would be unaffected.

The National Audit Office has already announced it will investigate the government's handling of the franchise.

The East Coast Mainline franchise was taken into public ownership in 2009 after being run by National Express.

It was re-privatised when Stagecoach and Virgin signed a deal to run the East Coast line from 2015 to 2023, promising to pay the government £3.3bn to run the service.

Stagecoach owns 90% of the joint venture and Virgin owns the remaining 10%.

Ms Greenwood said: "There are serious questions to be asked of the train operator, Network Rail and ministers and the transport committee intends to ask them. The failure of the East Coast franchise has wider implications for rail franchising and the competitiveness of the current system. Lessons need to be learned by all concerned. In the meantime, the Department for Transport must take the right steps to protect passengers and taxpayers. Safeguards must be put in place to restore public confidence in the sustainability of our railways."

Mr Grayling has said he is considering two approaches. One option is to allow Stagecoach to continue operating the franchise on a short-term and not-for-profit basis until a new contract is awarded in 2020. Alternatively, East Coast Mainline could be brought back under government control and be run by the Department for Transport through an operator of last resort.

Mr Grayling told the House of Commons on Monday last week: "The problem is that Stagecoach got its numbers wrong. It overbid and is now paying a price."

[Western Pathfinder]

SoS announces that East Coast is now going to DoR status this lunchtime.
https://www.bbc.co.uk/news/amp/business-44142258?__twitter_impression=true

[broadgage]

I think that the RMT^▸ (National Union of Rail, Maritime & Transport Workers) should put in a bid for the franchise, and show us all how it should be done !

With no "fat cat" shareholders, just think what huge improvements could be made