East Coast franchise - ongoing discussion, merged topic

[whole diary]

[Btline]

Excellent news:

NATIONAL EXPRESS has struck an outline deal with the government to scrap its troubled east-coast train franchise, which should pave the way for a ^400m rights issue and boardroom shake-up at the bus and rail group.

Transport officials plan to replace the east-coast deal, struck with National Express just over two years ago, with a management contract, under which the company would operate the line for a fixed fee. It may then be relet to a new operator at a later date.

The east-coast line, which links London to Edinburgh via York and Leeds, carries 17m passengers a year and employs 3,100 staff.

National Express beat fierce competition to take it over, promising to pay nearly ^2 billion in premiums back to the government over eight years. But recession has left the company struggling to make money from the route.

The government, led by rail minister Lord Adonis, has rejected requests for a renegotiation of the franchise.

Rail-industry sources said a meeting on Thursday between Ray O^Toole, National Express^s UK^▸ (United Kingdom) chief executive, and Mike Mitchell, the top rail official at the Department for Transport (DfT^» (Department for Transport - about)), resulted in an outline agreement for the franchise to be suspended and replaced with a contract under which National Express would receive a flat management fee.

Removal of the uncertainty should clear the way for a ^400m fundraising by National Express . It has just over ^1 billion in loans, with ^484m to be refinanced by February.

A ^400m rights issue is seen as the most likely option, but it is understood that some shareholders have demanded management change before agreeing to support an injection of new equity.

Insiders say Richard Bowker, National Express^s chief executive, may come under pressure from those unhappy at how the east-coast deal has played out. Bowker faces investors at the company^s annual meeting on Wednesday.

National Express would not give details of its discussions with the DfT. ^All train-operating companies have regular meetings with the DfT and as a company we never talk about in public what we discuss in private,^ it said.

The DfT said: ^As we have made clear on numerous occasions we do not renegotiate franchises.^

Source: http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6210941.ece

I also echo the reader comments made on the above page.

[Electric train]

Wonder who will bid for the franchise when it is released  Virgin? First? or DB^» (Deutsche Bahn - German State Railway - about)? now that would set the hares running

[RailCornwall]

I note the usual Nationalise it suspects are making comments in that direction. I predict it'll end up with an existing operator, despite my own feeling that a new entrant would be good, if and when it gets re-advertised.

[devon_metro]

Btline, your topic title is a tad "dailymail-esque"

They aren't scrapping it, simply changing the way its run. (If there is any truth in this at all!)

[Zoe]

Wonder who will bid for the franchise when it is released  Virgin? First? or DB^» (Deutsche Bahn - German State Railway - about)? now that would set the hares running

My first choice would be to renationalise but that isn't likely, my second would be to continue the management contract.  If it is re-franchised though First would give the benefit of having all services out of Kings Cross owned by a single company.

[John R]

Btline, your topic title is a tad "dailymail-esque"

They aren't scrapping it, simply changing the way its run. (If there is any truth in this at all!)

Not true. A management contract is not a franchise. GNER^▸ (Great North Eastern Railways) ran it on behalf of the government under a management contract for the last few months. The franchise ended when the management contract was put in place.

[Zoe]

Not true. A management contract is not a franchise. GNER^▸ (Great North Eastern Railways) ran it on behalf of the government under a management contract for the last few months. The franchise ended when the management contract was put in place.

Virgin Cross Country went onto a management contract in 2002.  The franchise was not re-let until 2007.

[vacman]

Hope First get it so I get free travel on there then!

[Btline]

First group getting it would be a good idea, so the Hull trains, Harrogate trains (if they come) etc. can integrate.

Virgin getting would result in competition problems.

[Super Guard]

Hope First get it so I get free travel on there then!

[RailCornwall]

First group getting it would be a good idea, so the Hull trains, Harrogate trains (if they come) etc. can integrate.

Virgin getting would result in competition problems.

Why would those working for these services want to be integrated into a greater franchise, the cache of working for a perceived different and somewhat exclusive operation would be lost and of course when cuts are needed these operations would be under threat again?

A wholly owned Virgin Franchise sounds attractive if it has to be a UK^▸ (United Kingdom) operator, not a 51:49 split with Stagecoach.

DB^» (Deutsche Bahn - German State Railway - about) Fernverkehr would be ideal leading to some interesting possibilties for through DB operation between Germany and the UK when the ICE arrives at St Pancras International. DB has the attraction too that it could drive it's own bargain as a major player with a huge amount of cache and prestige in Rail operations. It could have enough clout to sort out DFT^▸ (Department for Transport) Rail too.

 

[John R]

Wonder what happened to the rule that if you hand your keys in to one franchise you hand them in for the lot.

I'm sure it would be highly embarrassing for DfT^» (Department for Transport - about) to have to take on three all at the same time,  but I'm intrigued as to what weasel words they will use to justify not taking control of the LTS and London Eastern franchises.

Given it's less than 2 years since DfT were crowing that they had managed to relet the East Coast franchise with a similar (of not larger) premium payment than GNER^▸ (Great North Eastern Railways) had contracted to, this whole episode will be very embarrassing for them.

Don't suppose the management contract will replace the dining cars though.....     

[Btline]

But NX have done a good job with c2c. (except the name) So should they have to hand the keys back for LTS?

Then again, finding an operator to operate LTS badly would be difficult. Even Arriva would manage...

I think it will scupper there chance of getting their hands on Southern!

[Electric train]

But NX have done a good job with c2c. (except the name) So should they have to hand the keys back for LTS?

Then again, finding an operator to operate LTS badly would be difficult. Even Arriva would manage...

I think it will scupper there chance of getting their hands on Southern!

Don't bet on it

[Btline]

I think Govia should/will retain it.

When they realised a short franchise was needed until Thameslink was finished, why didn't they just extend the Southern franchise?

If Govia do lose it, a lot of money will be wasted on re-branding, which will become obsolete within a few year.