'FGW's ^50 million bailout revealed'

[whole diary]

[Chris from Nailsea]

From the London Evening Standard:

First Great Western, the much-criticised Paddington-based train company, has received a secret ^50 million bailout from the taxpayer.

Figures from FirstGroup today revealed profits from its rail operations plunged more than 20% last year.

But they would have been far worse were it not for a handout from the Department for Transport because recession-hit passenger revenue numbers are not coming in on budget.

The news indicates the extent of the crisis on the railways.

Stagecoach's South West Trains is in dispute with the department in a bid to claw back money while National Express is expected by many in the industry to have to hand the keys back to its King's Cross-based East Coast Main Line business.

At issue is the falling profitability of the rail companies serving London.

Job losses in the capital have put the brakes on expected commuter passenger growth and the economic crisis has also seen passengers who used to travel first class trading down to standard.

In addition leisure travellers have wised up to the rip-off fares on the railways and are now more likely to pre-book cheaper advance tickets rather than pay full whack "walk-on" fares on the day.

Sir Moir Lockhead, the FirstGroup chief executive who has been the victim of abuse from passengers who christened the Paddington services Worst Late Western, said today: "What we have is a very resilient business with very good protection."

What Lockhead means is that under the terms of its contract to run First Great Western, if passenger revenues begin to fall below the targets it said it would hit in its franchise agreement, then the department will use taxpayer money to make up the shortfall.

In the case of First Great Western, if that shortfall is worse than 94% of target then the department for Transport and the taxpayer pick up 80% of the cost.

Lockhead admitted in FirstGroup's financial year to the end of March that handout was worth ^50 million to First Great Western, a franchise which was planned to be so profitable that from this year it is supposed to be making so-called premium payments back to the Treasury. The emergency handout arrangement for First Great Western continues this year.

For the full article, click here.

[eightf48544]

Another DaFT^» (Department for Transport - critical sounding abbreviation I discourage - about) cock-up!

[IndustryInsider]

And another typically written Evening Standard piece of 'journalism'!

[Tim]

And another typically written Evening Standard piece of 'journalism'!

Absolutely.  I assume that they are just refering to the pre-agreed operation of the "cap and collar" part of the franchise agreement rather than some secret dodgy handout. 

You could argue that the "cap and Collar" is entirely sensible.  If it wasn't in place you could bet the TOCs^▸ (Train Operating Company) would have demanded much more favourable franchise terms to "price-in" the transfer of risk from the public to private sector.

Whilst I think that the whole system is a mess and have no particular fondness for Moir Lockhead and his companies, I'd rather the ressession didn't result in First handing back the keys just as they have started to get their act together wrt running the railway.   

[Btline]

In addition leisure travellers have wised up to the rip-off fares on the railways and are now more likely to pre-book cheaper advance tickets rather than pay full whack "walk-on" fares on the day.

This needs to be sorted! Perhaps by reducing the number of Advance fares, and making them more expensive; and lowering the price of Off-Peak tickets/ introducing more Super Off-Peak tickets. This will win back leisure passengers, and allow us to have a "turn up and go" railway. (esp after Virgin's HF timetable)

I'll be paying ^3.65 (Advance Single with railcard) for Kidderminster - London Euston - arriving early afternoon, because it is a lot cheaper than going Worcester - Paddington (over ^20)

However, if there was a walk up fare of about ^10-^15 Worcester Paddington for travelling at around mid-day, I would use that!

[Chris from Nailsea]

And another typically written Evening Standard piece of 'journalism'!

In a perhaps slightly more measured article, the Telegraph points out that the figure is actually ^40 million - due to the payment of ^10 million made by First Group to the Government, in respect of TransPennine Express.

[cereal_basher]

In addition leisure travellers have wised up to the rip-off fares on the railways and are now more likely to pre-book cheaper advance tickets rather than pay full whack "walk-on" fares on the day.

This needs to be sorted! Perhaps by reducing the number of Advance fares, and making them more expensive; and lowering the price of Off-Peak tickets/ introducing more Super Off-Peak tickets. This will win back leisure passengers, and allow us to have a "turn up and go" railway. (esp after Virgin's HF timetable)

I'll be paying ^3.65 (Advance Single with railcard) for Kidderminster - London Euston - arriving early afternoon, because it is a lot cheaper than going Worcester - Paddington (over ^20)

However, if there was a walk up fare of about ^10-^15 Worcester Paddington for travelling at around mid-day, I would use that!

No, don't remove cheap advance fares. What a ridiculous idea. Cheap advance fares are what enables me and my family to travel by rail, we don't want cheaper Walk-On fares, we want the cheap advance fares which are very popular, they offer great value rail travel. Walk-on fares don't.

[bemmy]

At issue is the falling profitability of the rail companies serving London.

Presumably then the profits of Arriva Trains Wales, Scotrail, Crosscountry etc are still rising? 

[paul7575]

At issue is the falling profitability of the rail companies serving London.

Presumably then the profits of Arriva Trains Wales, Scotrail, Crosscountry etc are still rising? 

You have to differentiate between operating profits, premiums and subsidy. None of the three TOCs^▸ (Train Operating Company) you mention are expected to return a premium to the DfT^» (Department for Transport - about), so in practice they are not reliant on the farebox in the same way FGW^▸ (First Great Western) are.

Paul

[bemmy]

At issue is the falling profitability of the rail companies serving London.

Presumably then the profits of Arriva Trains Wales, Scotrail, Crosscountry etc are still rising? 

You have to differentiate between operating profits, premiums and subsidy. None of the three TOCs^▸ (Train Operating Company) you mention are expected to return a premium to the DfT^» (Department for Transport - about), so in practice they are not reliant on the farebox in the same way FGW^▸ (First Great Western) are.

Paul

So is it the case that a fall in passenger revenues for these TOC's will be fully offset by an increase in subsidy?

[grahame]

At issue is the falling profitability of the rail companies serving London.

Presumably then the profits of Arriva Trains Wales, Scotrail, Crosscountry etc are still rising? 

You have to differentiate between operating profits, premiums and subsidy. None of the three TOCs^▸ (Train Operating Company) you mention are expected to return a premium to the DfT^» (Department for Transport - about), so in practice they are not reliant on the farebox in the same way FGW^▸ (First Great Western) are.

Paul

So is it the case that a fall in passenger revenues for these TOC's will be fully offset by an increase in subsidy?

I don't think 'fully', but 'mostly'.  I looked at Cap and Collar a while back:
http://canber.co.uk/?q=node/32

[Btline]

In addition leisure travellers have wised up to the rip-off fares on the railways and are now more likely to pre-book cheaper advance tickets rather than pay full whack "walk-on" fares on the day.

This needs to be sorted! Perhaps by reducing the number of Advance fares, and making them more expensive; and lowering the price of Off-Peak tickets/ introducing more Super Off-Peak tickets. This will win back leisure passengers, and allow us to have a "turn up and go" railway. (esp after Virgin's HF timetable)

I'll be paying ^3.65 (Advance Single with railcard) for Kidderminster - London Euston - arriving early afternoon, because it is a lot cheaper than going Worcester - Paddington (over ^20)

However, if there was a walk up fare of about ^10-^15 Worcester Paddington for travelling at around mid-day, I would use that!

No, don't remove cheap advance fares. What a ridiculous idea. Cheap advance fares are what enables me and my family to travel by rail, we don't want cheaper Walk-On fares, we want the cheap advance fares which are very popular, they offer great value rail travel. Walk-on fares don't.

But why should a person who suddenly needs to travel have to be faced with sky high fares? Why should a person who books ahead be restricted to a specific train, so if their meeting finishes early, they can't catch the next train home?

I agree that the Advance Fares are popular and good value, but ^3.65 for a 150ish mile journey is unfair when a walk on person pays over the roof!

Walk on fares could be good value if the were re-priced. And that means a fair fare.

[paul7575]

You have to differentiate between operating profits, premiums and subsidy. None of the three TOCs^▸ (Train Operating Company) you mention are expected to return a premium to the DfT^» (Department for Transport - about), so in practice they are not reliant on the farebox in the same way FGW^▸ (First Great Western) are.

Paul

So is it the case that a fall in passenger revenues for these TOC's will be fully offset by an increase in subsidy?

There was  a partial explanation in Rail Management http://91.186.0.3/~keepingt/rm/195/RMAN_195.pdf this week, quoting AXC^» (Arriva Cross Country - about) [Page 2]. The main thrust of the article is that the RMT^▸ (National Union of Rail, Maritime & Transport Workers) will always paint the worst picture possible...

"...Arriva is said to be facing heavy losses on CrossCountry, again according to the RMT. However, Arriva dismissed the union^s claim. ^We have spelt out the sensitivities of our franchises in recent reports to the market,^ said a spokesman. He continued: ^The reality is that CrossCountry is supported at present by subsidies: fares are an important part of its income but are not the whole story. That is not the case for franchises run by other groups which are paying premiums, of course, but in the case of CrossCountry, and even more Arriva Trains Wales, we are not critically sensitive to minor fluctuations in passenger numbers. To speak of ^heavy losses^ at XC^▸ (Cross Country Trains (franchise)) is simply not credible."

Paul

[vacman]

In addition leisure travellers have wised up to the rip-off fares on the railways and are now more likely to pre-book cheaper advance tickets rather than pay full whack "walk-on" fares on the day.

This needs to be sorted! Perhaps by reducing the number of Advance fares, and making them more expensive; and lowering the price of Off-Peak tickets/ introducing more Super Off-Peak tickets. This will win back leisure passengers, and allow us to have a "turn up and go" railway. (esp after Virgin's HF timetable)

I'll be paying ^3.65 (Advance Single with railcard) for Kidderminster - London Euston - arriving early afternoon, because it is a lot cheaper than going Worcester - Paddington (over ^20)

However, if there was a walk up fare of about ^10-^15 Worcester Paddington for travelling at around mid-day, I would use that!

No, don't remove cheap advance fares. What a ridiculous idea. Cheap advance fares are what enables me and my family to travel by rail, we don't want cheaper Walk-On fares, we want the cheap advance fares which are very popular, they offer great value rail travel. Walk-on fares don't.

But why should a person who suddenly needs to travel have to be faced with sky high fares? Why should a person who books ahead be restricted to a specific train, so if their meeting finishes early, they can't catch the next train home?

I agree that the Advance Fares are popular and good value, but ^3.65 for a 150ish mile journey is unfair when a walk on person pays over the roof!

Walk on fares could be good value if the were re-priced. And that means a fair fare.

If your organised and plan ahead you save money! simple!

[Super Guard]

I am a bit perplexed that the Telegraph interview had no mention of FGW^▸ (First Great Western)'s problems early last year