InterCity East Coast: Doomed to Fail?

[Up_Tilt_390]

So I've been thinking about this lately, and me and my friend have come to agree that it seems the InterCity East Coast franchise is cursed. So far, in the 21 years it has existed, only one operator has managed to operate their full original term, which was GNER from April 1996 until March 2005. But since then, every new private operator on the line has failed to run it to expectations. GNER won in 2005, but Sea Containers then went bankrupt in December 2007, and then National Express took over, only to fail again less than two years later in November 2009.

Now after running the line for not three years, Virgin Trains East Coast have had the franchise shortened by three years due to losses on the franchise. By contrast, Virgin Trains have kept the InterCity West Coast franchise since it was first won in 1997, albeit with almost losing it in 2012. But then wasn't part of Virgin's argument to keep the franchise being that other operators on East Coast failed twice? Quite ironic now even though VTEC is only really Virgin in it's name, but if Richard Branson likes to show off "his" new Azuma trains you can bet he's a bit guttered about it.

It seems that since GNER's second win the only operator that did well on the line was East Coast when it was in public ownership, returning £1 billion back to the treasury. So much for being the operator of last resort. But according to railway historian, Christian Wolmar (at 4:05) East Coast is a relatively simple franchise to run. If it's so simple though, why did private operators fail two consecutive times in about three years despite the private operator being superior (according to the majority of the Conservatives at least)?

I know this sounds a bit more like a privatisation rant, but I am genuinely concerned about the fact that the East Coast Main Line has suffered several times with operators who have consistently failed to meet the original expectations since 2005. What is it about the franchise that just makes things so hard for the private operators to meet their original standards? Is it just doomed to fail or has it just been poor management? If it's the latter then some people need sacking by the looks of it.

 

[Clip]

I think the general consensus on this forum as its been made a few times in threads recently is that the DfT appear to want too much from the franchise and thus with NR also not delivering on improvements this time its just falling over.

Personally I believe that people want it to be all things to all men and with adding extra destinations just makes the whole thing more difficult.

Yes I get that people want direct to London services but sometimes you just have to settle for having to change.

 

[Marklund]

IMHO, because it should be a cash cow, it's the overbidding, and back end loading of payments that's doomed NX, and SC/VT.
It's the magic get out of jail free card by either handing back the keys, or "re-negotiating" that allow them to do this.

Yes, NR hasn't delivered what was originally planned, but SC/VT were struggling to meet forecasts even without.

 

[ChiefPlanner]

About 90% of the business is optional (very little regular commuter flows - though there are some) , heavily skewed to the London (and SE) market - especially leisure. Open Access competition.

Being a 200 -400 mile service pattern , and despite a modest number of trains , (but still way more than BR ran) , tricky to achieve PPM targts as even 4 late trains a day , puncture the planned targets.

Prone to catastrophic line of route incidents.

Finally - IEP will probably double the operating costs.

 

[mrmatt]

DOR only seemed to not fail financially though as any premiums paid would simply be any profit not reinvested. There was no predefined premiums that were due.

Has SC/VT paid any less in premium so far compared to the end of DOR?

 

[skyhigh]

It seems that since GNER's second win the only operator that did well on the line was East Coast when it was in public ownership, returning £1 billion back to the treasury. So much for being the operator of last resort.

I've seen it mentioned on here that East Coast happened to fall between the required major overhauls for the rolling stock, meaning a much lower expenditure on maintenance. Combined with deferring other maintenance it meant that the figures looked much better than they would have been if East Coast carried on long term.

I don't know how much truth there is in that, but it sounds plausible. I'm sure someone with more knowledge would be able to comment on that though.

 

[yorksrob]

I've seen it mentioned on here that East Coast happened to fall between the required major overhauls for the rolling stock, meaning a much lower expenditure on maintenance. Combined with deferring other maintenance it meant that the figures looked much better than they would have been if East Coast carried on long term.

I don't know how much truth there is in that, but it sounds plausible. I'm sure someone with more knowledge would be able to comment on that though.

It was mostly electrified in 1989, with the Mk4's dating from the same time, so GNER had some pretty new kit.

 

[Agent_Squash]

VTEC hasn't handed in the keys yet - and although terrorism and Brexit are listed as the reasons for the losses, you can be sure that NR delivery delays have something to do with it.

 

[greyman42]

I don't see how they can blame terrorism or Brexit. Neither has had any marked effect on the economy or more specifically, Rail travel.

 

[thenorthern]

One thing to remember is that in 1996 the East Coast Main Line was to a certain extent the main north to south main line as prior to the West Coast Main Line upgrade the journey time from London to Glasgow on the West Coast Main Line was more than 5 hours and Virgin Trains only ran a two hourly London to Glasgow service, GNER also ran an two hourly service from London to Glasgow that took only a bit longer and using much nicer and faster trains than the Class 86, 87 and 90 with Mark 3 coaches that Virgin Trains had in those days.

Since then however the journey time on the West Coast Main Line have made it so an East Coast Main Line operator can't compete with services from London to Glasgow so most those services have been withdrawn. Also there are some very long but direct London Euston to Edinburgh services which if cheaper than the East Coast Main Line some people will choose to take.

The biggest thing however I think is Open Access operators as because in 1996 GNER had a monopoly on a lot of services but since then it is no longer the main operator for services to Sunderland, Hull and Bradford and its lost its monopoly on the very lucrative services to Doncaster and York.

 

[Chrisgr31]

Has SC/VT paid any less in premium so far compared to the end of DOR?

I am sure that I have read that the premiums being paid by Virgin Easy Coast to the DfT are higher than those that were paid by DOR.

My understanding as someone else has mentioned is that the premium payments promised to the DfT are too high and effectively ticket income growth doesnt match the amounts predicted in the franchise bid.

The reality appears to be there is too much attention of premium payments at the bid stage and not enough on customer service and income reality. It is of course one benefit of the GTR management contract that it is not affected by ticket revenue, although has plenty of other issues!

 

[D365]

It was mostly electrified in 1989, with the Mk4's dating from the same time, so GNER had some pretty new kit.

Though the Class 91s were in need of a mechanical overhaul only ten years into their working lives.

 

[yorksrob]

Though the Class 91s were in need of a mechanical overhaul only ten years into their working lives.

Well, they are quite intensively used !

 

[SPADTrap]

Having red hot branding won't pay the bills alone. This seems to have sent VTEC management into a confused spin resulting in more strange branding and confused meetings as to why it isn't working.

 

[SamYeager]

Yes, NR hasn't delivered what was originally planned, but SC/VT were struggling to meet forecasts even without.

My impression from another thread is that VTEC would have had to live with the forecast shortfall but NR not delivering their side of the contract allowed VTEC to bring DfT to the table to renegotiate.

 

[Marklund]

My impression from another thread is that VTEC would have had to live with the forecast shortfall but NR not delivering their side of the contract allowed VTEC to bring DfT to the table to renegotiate.

That's my understanding too. It's given a struggling franchise a convenient get out from their responsibilities.

 

[Chrisgr31]

According to this article they are paying a premium 30% more that DOR were http://www.railwaygazette.com/news/...-coast-making-a-loss-stagecoach-confirms.html and making a loss.

 

[cuccir]

This may be stupid but: what if the franchise were split? Perhaps one operating services that go north of Yorkshire, and another operating Leeds/Yorkshire/Lincoln/Newark terminating services, but with open access scrapped?

There'd be genuine competition on the line, and the two TOCs would specialize on the different demands of their services?

 

[DenmarkRail]

Too much competition on EC. Compare EC to WC:

EC
VTEC (All from KGX to Inverness)
GN (Far as Peterborough)
Hull Trains (Far as Hull)
Grand Central (Far as Bradford / Sunderland)
East Coast Rail (COMING SOON Far as Edinburgh)

WC
VTWC (All from EUS to Edinburgh)
LM ( Far as Liverpool)

So if we look at it, VTEC are having to compete for every route, except the KGX to Inverness route, where as Virgin are only competing in reality, on EUS to BHM, and EUS to LIV/CREWE... It is completly natrual given the circumstances that VTEC does worse than VTWC.

 

[JonathanP]

So why is there no competition on the West Coast?
Lack of paths? Lack of alternative destinations to avoid being labelled as 'primarily abstractive'? Lack of business potential?

 

[thenorthern]

So why is there no competition on the West Coast?
Lack of paths? Lack of alternative destinations to avoid being labelled as 'primarily abstractive'? Lack of business potential?

Generally Virgin Trains have managed to prevent open access operators from starting up by a variety of methods, until 2012 they had a moderation of competition clause which meant only they could operate services to London from certain stations such as Wolverhampton and Stockport. They also introduce new services when they think an open access operator is planning to such as in 2008 Virgin Trains introduced a London to Wrexham train to compete with Wrexham and Shropshire. Also when Alliance Rail was looking at introducing services from London to Blackpool Virgin Trains announced a new services from London to Blackpool.

 

[ainsworth74]

So why is there no competition on the West Coast?
Lack of paths? Lack of alternative destinations to avoid being labelled as 'primarily abstractive'? Lack of business potential?

For quite a long period of time (through to 2012? 2011?) there moderation of competition agreement in place between VTWC and the relevant bodies that there would be no direction competition (i.e. no open access) on their flows. I assume as part of the settlement that rescued the WCML route modernisation.

Since that has been lifted there is one open access operator that has gained approval but has yet to turn a wheel in anger (Alliance Rail's service to Blackpool).

 

[xotGD]

Too much competition on EC. Compare EC to WC:

EC
VTEC (All from KGX to Inverness)
GN (Far as Peterborough)
Hull Trains (Far as Hull)
Grand Central (Far as Bradford / Sunderland)
East Coast Rail (COMING SOON Far as Edinburgh)

WC
VTWC (All from EUS to Edinburgh)
LM ( Far as Liverpool)

So if we look at it, VTEC are having to compete for every route, except the KGX to Inverness route, where as Virgin are only competing in reality, on EUS to BHM, and EUS to LIV/CREWE... It is completly natrual given the circumstances that VTEC does worse than VTWC.

Don't forget Cross Country Doncaster - Edinburgh and TPE York - Newcastle (to be extended to Edinburgh)

 

[Marton]

The biggest thing however I think is Open Access operators as because in 1996 GNER had a monopoly on a lot of services but since then it is no longer the main operator for services to Sunderland, Hull and Bradford and its lost its monopoly on the very lucrative services to Doncaster and York.

I heave been told, from what I understand is a reliable source, that the biggest problem with GNER’s second term was that they were ready to agree when they were told At the last minute that it was now with competition and that they couldn’t review their bid.

 

[colchesterken]

I thought the "free market" was all about failures falling by the wayside..Clearly the current lot overbid to get the contract.
If they cannot meet their obligations, as soon as they fail in any part they should be in the same position as any one in breach of contract i e a forfeiture and claim for compensation by the DFT. it seems to me a deal has been done to cover up taking it back into public hands..

 

[waterboo]

Too much competition on EC. Compare EC to WC:

EC
VTEC (All from KGX to Inverness)
GN (Far as Peterborough)
Hull Trains (Far as Hull)
Grand Central (Far as Bradford / Sunderland)
East Coast Rail (COMING SOON Far as Edinburgh)

WC
VTWC (All from EUS to Edinburgh)
LM ( Far as Liverpool)

So if we look at it, VTEC are having to compete for every route, except the KGX to Inverness route, where as Virgin are only competing in reality, on EUS to BHM, and EUS to LIV/CREWE... It is completly natrual given the circumstances that VTEC does worse than VTWC.

Its also worth mentioning that VTWC are also competing with Chiltern Rail on the London to Birmingham route, despite being two different networks.

 

[ash39]

Don't forget Cross Country Doncaster - Edinburgh and TPE York - Newcastle (to be extended to Edinburgh)

I think the original point was out of London rather than over the extent of the line (otherwise you could say TPE are a competitor of VTWC on the Preston to Glasow/Edinburgh section of the WCML). However, it's a valid point either way. There are definitely more operators fighting for revenue on the ECML.

Still, I find it impossible to believe with the price of anytime fares and the amount of business travel the ECML must generate, that it can't be a profitable franchise. I'm also surprised that one of the excuses VTEC offered was that passenger numbers hadn't increased as expected. How much do they need to increase? Surely a 1-2% increase in passengers, some of which would likely be on cheap advance fares, wouldn't affect the bottom line by that much?

 

[fowler9]

Please feel free to correct me because I am really just guessing and the cost of winning the franchise my be a lot less than the WCML but the WCML has got faster and the ECML serves a much less densely populated area.

 

[F Great Eastern]

If they cannot meet their obligations, as soon as they fail in any part they should be in the same position as any one in breach of contract i e a forfeiture and claim for compensation by the DFT. it seems to me a deal has been done to cover up taking it back into public hands..

The DFT are in breach of contract by not providing contracted infrastructure and I suspect that an agreement has been done between the DFT and VTEC in this scenario about ending the franchise early because the DFT know that

It does amuse me however that people will happily ignore one side actually breaching the franchise agreement and then hit out at a party who haven't even breached it yet.

Contracts work both ways. There's no hope that the DFT would be able to do what you asked as VTEC would point out in court that their bid was based on said infrastructure being provided which wasn't at which point the DFT would end up being the ones that would be paying compensation.

This is a pure DFT cock-up. If they had provided the infrastructure on time then VTEC would have no cards to play here and would have to suck it up or face breaching the contract and the penalties they would suffer from that. But since the DFT have made a cock up they've got an extremely weak hand.

 

[thenorthern]

Terrorism did affect GNER in 2005 as you have to remember it was a very different state of affairs in 2005 and the thought of an Islamist suicide attack in the United Kingdom was unthinkable and no one thought it could or would happen. When it did happen on July the 7th 2005 there was moral panic and people were avoiding London for a time. I know GNER did suffer from the terror attacks and if I remember correctly for July 7-9 there were no services in and out of London Kings Cross.

Today however the terrorist threat it much higher and there are much more attacks across Europe but we have grown immune to it its just "oh there has been another terror attack lets get on with life".