Virgin-and-Stagecoach demand scrapping of rail franchises

[OwlMan]

Virgin & Stagecoach want a reform of rail privatisation

http://www.telegraph.co.uk/finance/...-of-rail-franchises-to-boost-competition.html

Sir Richard Branson's Virgin and Stagecoach have called for rail franchises to be scrapped on inter-city routes and replaced by a licensing system in a radical overhaul they claim would boost competition.

The two companies, which jointly run the East Coast and West Coast franchises, have also urged the Competition and Markets Authority to abolish all open-access arrangements on routes that allow rival firms to run services that compete with the franchise operator.

They have made the case for a revamp of the railways in response to a CMA consultation. The watchdog announced in July that it was examining ways of boosting competition to drive down fares.

It also comes as Virgin and Stagecoach face the threat of open-access competition on the East Coast between London and Edinburgh.

While open-access operators already run services on parts of the main line, Virgin Trains, the consortium of Stagecoach and Virgin, currently has the monopoly on the London to Edinburgh route. However, FirstGroup and Alliance Rail have both submitted open-access proposals to offer rival services.

A decision from the Office of Rail and Road is due by the end of the year.

“The current confused and damaging mix of both open-access services and franchised networks does not provide a level playing field, with biased track access and ticketing regimes,” Stagecoach and Virgin said.

“This hybrid 'cherry-picking’ arrangement offers poor value for money for taxpayers, is an inefficient use of network capacity and, at worst, risks franchise failure.”

They argued that revenue growth from the East Coast had been “significantly lower” than other comparable franchises over the past 15 years because of open-access operators.

Instead, the two companies have called for a new licensing system to be introduced on inter-city routes that would involve bidding for bundles of so-called “train paths” in an auction that would be “based on a nationally agreed capacity statement”.

A train path is the infrastructure capacity required for a train to run between two locations in a given time-period. Virgin and Stagecoach offered to run a pilot on the East Coast, West Coast or Great Western lines.

“It would allow for multiple operators to compete on a route on a level playing field,” they said.

 

[najaB]

Interesting idea, a bit like slot-controlled airports. The only thing is that a path is more complex a beast than a slot.

 

[The Planner]

So higgest bidder gets the paths, of course that wouldn't favour Virgin/Stagecoach over the smaller operator at all now would it.....

 

[najaB]

So higgest bidder gets the paths, of course that wouldn't favour Virgin/Stagecoach over the smaller operator at all now would it.....

If they followed the model used by airports there would be limits to how many paths a single operator could hold. So it wouldn't all be down to who pays the most.

 

[Domh245]

Whilst it is an interesting idea, it does sound a little bit like them throwing their toys out of the pram at the prospect of loosing even more revenue, particularly now that Alliance are starting to happen on the WCML, and there is a potential 3rd OAO on the ECML

 

[najaB]

Whilst it is an interesting idea, it does sound a little bit like them throwing their toys out of the pram at the prospect of loosing even more revenue, particularly now that Alliance are starting to happen on the WCML, and there is a potential 3rd OAO on the ECML

Indeed it does.

 

[yorksrob]

Virgin and Stagecoach not wanting open access operators raining on their parade ? Surprise Surprise !

The open access chaps are very good at showing up Virgin's frankly lacklustre efforts at attractively pricing their service.

If this proposal goes ahead, expect more of Virgin/Stagecoach's yield management monster pecking away at the affordable end of the service and lots more expensive, empty seats.

 

[LNW-GW Joint]

ICEC is settled until 2023, bids for ICWC are just about to start for 2017, and ICGW comes round in 2018.
DfT/ORR/CMA are not going to change the process within 2 years, probably not for the rest of this parliament (2020).
So I'm not sure anything will happen.
The GW franchise doesn't lend itself to joint operation in its present form, as it includes local/regional services as well, unlike EC and WC.
The DfT and CMA have a history of not seeing eye-to-eye on things, notably rolling stock policy.
Then there's the Corbyn factor...

 

[Carlisle]

Interesting idea, a bit like slot-controlled airports. The only thing is that a path is more complex a beast than a slot.

Wasn't that idea seriously considered during the original privatisation proposals but eventually rejected in favour of franchising

 

[GatwickDepress]

Well, colour me surprised... not. Any changes proposed by them is certainly not on behalf of the passenger, that's for sure.

 

[najaB]

Wasn't that idea seriously considered during the original privatisation proposals but eventually rejected in favour of franchising

I wasn't around during that era, but I understand it was.

 

[coppercapped]

Wasn't that idea seriously considered during the original privatisation proposals but eventually rejected in favour of franchising

Yes, it was. It is referred to in the book All Change - British Railway Privatisation, edited by Freeman and Shaw and published by McGraw-Hill in 2000. On p18 it states:

Services between origin/destination pairs have to be run according to a series of dedicated train paths monitored by the track authority. According to one official, the Treasury had intended simply to auction available paths to whoever offered the highest bid or required the lowest subsidy:

They had a view...that, if they had had the time, they would have devised a rather more sophisticated structure of allocating railway slots, which was effectively a system of auctioning...[but] with some minimum requirements to prevent grossly anti-competitive behaviour like running a train fractionally in front of another train and all that kind of stuff.

In this way, not only would there be competition in the market, between train services, but also competition for the market, through the auctioning of paths.

It quickly became evident that such a scheme would be inoperable, at least in the short term. The heterogeneous nature of rail services - trains serve different markets by running at different speeds and frequencies - means that they are vastly interdependent.

There follows detailed arguments about operating problems and network benefits of different approaches to train service provision.

 

[Stats]

Perhaps a bit of context would help here. This is not a Virgin/Stagecoach proposal. The idea is the CMA's.

The CMA have been conducting a policy review of competition on the railways since the beginning of the year. In July they issued a discussion document highlighting 4 options for the future of rail franchising and inviting comments on the options. The deadline for those comments was Friday. The options for discussion were:
Option 1: Retaining the current structure with significantly increased OAO provision
Option 2: Two franchisees for each franchise
Option 3: Overlapping franchises
Option 4: Licensing multiple operators, with certain conditions including public service obligations.

The CMA do not envisages any changes before 2023 at the earliest. The CMA have no powers here, it is merely initiating a discussion and providing evidence on how to provide increased competition on the railways.

The project page is at https://www.gov.uk/cma-cases/passenger-rail-services-competition-policy-project

 

[najaB]

There follows detailed arguments about operating problems and network benefits of different approaches to train service provision.

A franchise is effectively a package of paths.

 

[thenorthern]

I think Sir Richard Branson said before the 2012 franchise issue that he thought rail franchising should be scrapped. I kind of agree though that Franchised Operators are at a disadvantage compared to Open Access Operators as the Open Access Operators are allowed to cherry pick the best time to operate.

Not sure how auctioning train paths would work as there would be many bidders for peak time services but who would want to bid for the 23:15 service from London St Pancrass to Derby?

Given that European Union law currently means equal access to the network for open access operators I wonder if this is a policy David Cameron will try and re-negotiate with Brussels before the EU referendum.

 

[colchesterken]

That would not work any more that the present system works
When the railways were privatised they said it would encourage competition, In the early days we had competition in GEML First ran the outer suburban services and Anglia the fasts
You could get an off peak from Col to Liv st for £10 about 1/3 less than First
Then they combined then to make it "more efficient" at Liv st
Corbyn we need you!!!

 

[Bletchleyite]

I agree Open Access is primarily abstractive. To me on rail competition is a fallacy, and the railway is better acting as one to compete against the car.

 

[yorksrob]

I agree Open Access is primarily abstractive. To me on rail competition is a fallacy, and the railway is better acting as one to compete against the car.

In theory perhaps.

But the reality on the ground seems to me that Open Access is far more likely to result in cheaper fares being available than a nice Virgin/Stagecoach/DfT stitch up.

 

[Harryn9000]

It funny when I was travelling on train to Birmingham last month virgin was cheaper than open access operator London Midland who have more trains between Liverpool and Birmingham

 

[cf111]

It funny when I was travelling on train to Birmingham last month virgin was cheaper than open access operator London Midland who have more trains between Liverpool and Birmingham

London Midland hold the West Midlands franchise.

 

[Darandio]

It funny when I was travelling on train to Birmingham last month virgin was cheaper than open access operator London Midland who have more trains between Liverpool and Birmingham

London Midland are not Open Access.

 

[Harryn9000]

London Midland hold the West Midlands franchise.

Ah right my mistake, my point still stand that they are more expensive for the exact same journey than virgin

 

[coppercapped]

That would not work any more that the present system works
When the railways were privatised they said it would encourage competition, In the early days we had competition in GEML First ran the outer suburban services and Anglia the fasts
You could get an off peak from Col to Liv st for £10 about 1/3 less than First
Then they combined then to make it "more efficient" at Liv st
Corbyn we need you!!!

You have obviously misremembered what was published at the time of privatisation. When the franchising model was selected as the method to get state payments to private operators who were required to run loss making services, the competition was for the franchise, not for a particular passenger on a route. This was always clear. The franchisee was essentially granted a monopoly limited in time and space for his group of services.

There was never any question of serious competition between franchises on the same route. The early franchises were based on BR's existing service groups so, for example, Thames Trains and Great Western Trains touched at four or five stations (Reading, Didcot, Oxford, Newbury and Slough) and Great Eastern and Anglia touched at Colchester, Ipswich and a couple of other places. In both examples the franchisees operated different types of trains, one 'inter City' and the other suburban or regional. They did not compete on speed or facilities but only on price and then effectively only at those stations that they served in common. You couldn't choose to use a GWT service from Pangbourne rather than a TT one.

Anglia and Great Eastern did not 'combine', with the implication that it was their free will - they were combined by fiat of the Strategic Rail Authority in the second round of franchising.

In the early days the 'Moderation of Competition' requirements also meant that it was very difficult for an Open Access operator to break in.

And I would suggest that the present system works very well, it has doubled the number of passengers carried, it is showing the highest rate of growth in passenger numbers in Europe and it is the safest railway in Europe by a country mile.

 

[Class 170101]

A franchise is effectively a package of paths.

Not sure how auctioning train paths would work as there would be many bidders for peak time services but who would want to bid for the 23:15 service from London St Pancrass to Derby?

Possibly a package of paths would include some lucrative ones and some less lucrative ones like the 23:15 described - though I would question whether its a poor revenue earner all the time.

However this system would require NR to be able to plan all the paths and I don't think they have the manpower and I doubt the skills to do this.

 

[LNW-GW Joint]

Ah right my mistake, my point still stand that they are more expensive for the exact same journey than virgin

90% of the fares between Birmingham and Liverpool (or anywhere else) are interavailable and valid on any operator.
Operator-specific fares are very much in a minority.

 

[WillPS]

Ah right my mistake, my point still stand that they are more expensive for the exact same journey than virgin

More often (especially in walk up scenarios) LM is cheaper. Birmingham to London is one of the few long distance flows with real competition in fares between franchised operators (i.e. not involving connections).

 

[The Planner]

However this system would require NR to be able to plan all the paths and I don't think they have the manpower and I doubt the skills to do this.

Thanks for that, I will tell the other few hundred odd people we can't do our job then....

 

[radamfi]

And I would suggest that the present system works very well, it has doubled the number of passengers carried, it is showing the highest rate of growth in passenger numbers in Europe

That only indicates that the UK had a very low number of passengers before. Switzerland still has way more patronage per capita. That is like saying someone at school improving from a grade E to a grade C is better than someone who always gets an A. And how do you know that rail patronage wouldn't have increased under a different system? London's economy has boomed in the last 20 years and a lot of the rail growth is as a result of that.

 

[sheff1]

To me on rail competition is a fallacy, and the railway is better acting as one to compete against the car.

Well it is very noticable that, in the short time since Stagecoach lost the competition from East Coast for the Sheffield to London market, available Advance tickets on both the direct service to St Pancras and the route changing at Doncaster are now generally 2 or 3 levels (i.e. around 20%) higher* than they were when one owning company did not price both routes.

*At the time of day I normally travel anyway.

 

[najaB]

However this system would require NR to be able to plan all the paths and I don't think they have the manpower and I doubt the skills to do this.

Who do you suppose currently writes the timetable?