Rail Services At Risk From Recession?

[whole diary]

[super tm]

Or are they just using the "credit crunch" to do what they have wanted to do all along reduce off peak services there by reducing staff train sets etc

Will not make any difference to staff.  Same number of trains running with less coaches.

[Lee]

Shares in FirstGroup have dropped almost 15% after it said revenues at its Greyhound bus business in the US and Canada had fallen (links below.)
http://news.bbc.co.uk/1/hi/business/7828253.stm

http://www.theherald.co.uk/business/news/display.var.2481818.0.economic_slowdown_puts_the_brakes_on_firstgroup_growth.php

http://www.yorkshireeveningpost.co.uk/business-news/Transport-firm-FirstGroup-reports-good.4872783.jp

FirstGroup said Greyhound's revenue had been hit by "disappointing" trading at Thanksgiving and Christmas.

The company also said revenue growth in its UK^▸ (United Kingdom) rail business had slowed because of the weakening economy.

It has been hit by weakening demand for commuter journeys into London which affects its First Capital Connect franchise and to a lesser extent First Great Western, but the division is protected to the downturn by some extent by a subsidy worth ^200m a year to run ScotRail services as well as other public cash for the First TransPennine operation.

A spokesman said it had "no announcement to make" on jobs losses but added "as you would expect we are keeping a close eye on things like that but we have got 100,000 people across the UK and North America and I think any job cuts we will see will be a very small part of that number."

"The key is to see if you can become more efficient without affecting customer service.

"If there are fewer people come through a ticket office we will seek to reduce the hours. We are not going to announce lots of train driver redundancies because that it just not sustainable. We need train drivers."

The spokesman said there was little flexibility to change train timetables. He added: "The things we are looking at are things like ticket offices and the more back office stuff."

[Lee]

Further related link.
http://www.investorschronicle.co.uk/MarketsAndSectors/Sectors/article/20090116/3e6ba0de-dbf3-11dd-bd75-00144f2af8e8/FTSE-350-Transport.jsp

[Lee]

Routine talks between the Transport Secretary and the bosses of National Express, Stagecoach, First Group, Arriva and Go-Ahead on 20 January have assumed urgency because of the weakening economy and signs of waning performances at rail franchises (link below.)
http://www.guardian.co.uk/business/2009/jan/11/trains-buses-service-reduction

It is understood that the chief executives will seek assurances from Geoff Hoon that he is open to renegotiating their franchises, which could include a reduction in services, if falling passenger numbers put their franchise deals under excessive strain.

Related background link.
http://www.rmtbristol.org.uk/2008/12/busiest_train_operator_may_red.html#more

"There is nothing to stop us, if demand falls off, going to the department [for transport] and asking to take services out,"

Further related link.
http://www.nebusiness.co.uk/business-news/latest-business-news/2009/01/12/transport-operators-to-make-plea-for-help-51140-22670361/

Article links on the meeting between Geoff Hoon and the transport company CEO's.
http://www.guardian.co.uk/uk/2009/jan/21/rail-firms-call-for-state-aid

http://www.independent.co.uk/news/uk/home-news/rail-passengers-face-cut-in-services-as-recession-bites-1452284.html

http://www.telegraph.co.uk/travel/travelnews/4291216/Rail-cuts-threat-because-of-recession.html

http://www.bloomberg.com/apps/news?pid=20601102&sid=acBZMJhfjkvs&refer=uk

http://www.eadt.co.uk/content/eadt/news/story.aspx?brand=EADOnline&category=News&tBrand=EADOnline&tCategory=news&itemid=IPED20%20Jan%202009%2010%3A36%3A59%3A650

http://www.christianwolmar.co.uk/2009/01/its-a-tough-ask-for-the-rail-companies-to-sell-more-tickets-while-hiking-fares/

According to a briefing document seen by the Guardian, the industry expects passenger volumes to fall over the next two years, bringing years of growth to a sudden halt. An industry source said some franchises had seen falls in season ticket renewals of up to 10% in January.

"The more pessimistic forecasts will result in significant impacts on all train companies," reads the briefing document.

"At the most pessimistic end of the range, the severity of the downturn would be completely unprecedented and have potentially devastating effects on the finances of some train companies. Given that forecasts seem to be continually worsening, this must be a material risk."

According to the document, the rail executives want the Department for Transport (DfT^» (Department for Transport - about)) to fund 1,000 extra "customer-facing" staff for the railways, in the same month that the industry has announced plans to shed 1,500 people.

The most critical section of the document lays out "contingency plans" for a "very challenging environment", which include: shortening off-peak trains by removing carriages; easing borrowing rules so train operators can offset poor ticket sales; demanding that the government shoulders a larger share of losses on contracts; and requiring that Network Rail cuts some of the costly expansion programmes.

Several companies have already shed jobs and instituted wide-ranging internal restructuring to cut costs, but a slump in passenger numbers has led to a real fear of cuts to services.

One industry insider said: "There is historic evidence to suggest a retraction in demand in certain areas is on the cards this year. If that happens, companies will have to go back to the Government to discuss a change to their franchise agreements."

A DfT spokesman said: "This was one of a regular series of pre-planned meetings the Secretary of State holds with train operating companies. A range of issues was discussed, including the fact that passengers and operating companies are facing uncertain economic times. The companies said passenger numbers were still growing but they would monitor the situation closely. The train operating companies did not propose any cuts in services."

The Association of Train Operating Companies conceded that some operators may consider reducing train sizes, but said that the industry was fundamentally in good shape.

"If a major retailer announced growth of just under 5 per cent at a time like this, I think they would be pretty pleased," said a spokesman. "There is still growth in the industry."

"If passenger numbers fall far below what we are expecting, we will have to do something about it," said Keith Ludeman, chief executive of the Go Ahead Group, which runs about 30 per cent of the country's trains.

Options would include shorter trains and reviewing its timetable. "In extremis we would have to have a discussion with the Department for Transport about what is provided in our contract".

Mr Ludeman said passenger forecasts had been encouraging with the company expecting continued growth.

"However every business is now looking at the same forecast and every business is focused on cost reduction."

According to one well-placed industry source, the most recent franchise agreements negotiated by the Department for Transport did not even factor in the prospect of a downturn.

"The DfT was inviting bids which did not even entertain the idea of a recession, this was dreamland," he said.

"Already there are straws in the wind. Jobs are being lost, fares are being forced up and the announcement on the next generation of inter city train has been delayed."