Virgin Trains East Coast franchise to end 24 June 2018 and is temporarily re-nationalised

[Tetchytyke]

DOR had rewards that filled the seat. Passengers feeling the benefits from rewards are often likely to be return customers.

I had to spend £1000+ to get a "free" first class return. The marginal cost seat (redemptions only ever were available for seats in the lowest tier) was the reward for my custom.

Seatfrog rewards the one-off passenger after a cheap ticket and demeans those who've paid market rate for the first class product. It's just sleazy.

 

[Agent_Squash]

Because they are a business which has failed to honour a contract. Happy to take the profits when they are there but as soon as there is a loss they do a runner because they can.

But yet on every other occasion they've been able to honour the contract - this is an isolated incident for Stagecoach. Remember, the DfT/NR haven't exactly followed the contract to the letter either.

 

[Mugby]

I wonder what staff morale and attitudes will be like in the next few months!

 

[jayah]

I've just realised that it's only a week since the NAO said they would be investigating Grayling's proposal two months ago to set up a new track and train organisation on the East Coast route. Lots of room for speculating whether his announcement today is a result of what the NAO has already started saying to the DfT. or whether it has anything to do with the "troubling evidence" that Lord Adonis said he was going to share with the DfT.

Given his recent comparison of Brexit to the fall of Singapore and the Spanish Inquisition, I suggest Adonis gets on with revealing his evidence before the men in white coats arrive for him.

 

[BananaRepublic]

Except they weren't, because the premiums were all back-loaded.

Stagecoach took a well-run state business and ruined it. They believed their own hubris. Thought their private sector "efficiency" would drive up profits by driving down costs. Turns out leisure travellers won't put up with being fleeced...

The total amount of premiums due under the terms of the franchise are indeed backloaded, as they are with most franchises, but payments were due and have been paid since day 1.
VTEC paid the DfT £525m in the first 2 financial years of operation of the franchise.
That figure has now, according to this latest statement, reached a total of around £800m.
It took DOR 5 years to pay just under £1b, without having to invest any capital in the business.

As for "well run state business". EC was operated as a commercial company and DOR by a team of management consultants.
EC was state in name only, operating without the franchise yoke that is placed around the private company's necks.
They could just as easily been an entirely private concern in those circumstances, not bound by an unrealistic franchise agreement and returned the same level of performance.

To date VTEC have out performed EC financially, but have had to hand over more money than they've been able to make from the franchise.

 

[Tetchytyke]

this is an isolated incident for Stagecoach

Except it isn't. They sued for £100m "revenue support" on EMT, and got a similar figure again on SWT.

And that's before we consider the money Beardy has sucked out of the WCML.

 

[Marklund]

Because you reduce competition and possibly investment in the industry? National Express wasn't prohibited from bidding after NXEC collapsed - why should Virgin (who was there in name only) and Stagecoach?

Competition isn't my concern. Running an affordable railway is.
What investment have Stagecoach and Virgin actually put in to East Coast? The IETs aren't financed by them. I guess a few seat covers count though...
They've signed up for a deal, and reneged. How can you trust them again? You can't.

 

[neilm]

But yet on every other occasion they've been able to honour the contract - this is an isolated incident for Stagecoach. Remember, the DfT/NR haven't exactly followed the contract to the letter either.

Indeed see my other replies, they are walking from this because they can but that's because of DfT.

But they still overbid on this franchise as numbers were not great from the start and that was before the upgrades were meant to happen.

This will be an interesting case if it does end up in court as both sides have merits and would be interesting to see the future of franchising after this.

Abelio was mentioned in the Sunday times over the greater Anglia franchise not reaching projected numbers either.

 

[Marklund]

I had to spend £1000+ to get a "free" first class return. The marginal cost seat (redemptions only ever were available for seats in the lowest tier) was the reward for my custom.

Seatfrog rewards the one-off passenger after a cheap ticket and demeans those who've paid market rate for the first class product. It's just sleazy.

Thoroughly agree. The feeling a purchaser gets from a "reward" has a greater value than an auction for a seat that may or may not come off.
Rewards were much more likely to drive return custom, which seatfrog doesn't.

 

[Marklund]

And that's before we consider the money Beardy has sucked out of the WCML.

That's the WCML franchise that tries its damnedest to prevent competition...

 

[Tetchytyke]

As for "well run state business". EC was operated as a commercial company and DOR by a team of management consultants.
EC was state in name only

It was a state-owned company run successfully as a business. A commercial enterprise. Which part is inaccurate? They hired people who knew what they were doing. So what?

This is what I mean about the hubris of the private sector. Any successful state business couldn't possibly be successful and state-owned. It must be something else.

As for the money paid back to the Treasury, it is about the same as DOR paid. If DOR paid it but Stagecoach can't- and they clearly can't, that's why they're leaving- then clearly DOR were better at running the business. DOR paid it as profit, Stagecoach pay it only by making a loss. That's where the performance differs.

The "capital investment" was a bit of dead cow, a website that doesn't work, and covering for losses. I'll not get too excited by it.

Anyway, time for bed. I've enjoyed a good rant.

 

[Andrew32]

Hearing talk Northern could be heading the same way. Surely not. It's nightmare senario for DfT.

There's been told of this amongst staff since the start of the year.

It is rumoured that Arriva haven't asked for reimbursements from the government for losses incurred by industrial action as it would have to pay the government back if it throws in the franchise.

It's is rumoured that this will happen at the end of the financial year where they will tell the Dft that the franchise isn't deliverable due to delays in electrification and cascading of rolling stock from other tocs.

We will find out shortly if these rumours are true, we all know about railway rumours .

 

[43096]

You could have left it at that, really.

The truth is he's a big Stagecoach shareholder who will benefit the most from Failing Grayling's Big Beardy Bailout. Which isn't a bailout. Even though Stagecoach will get to keep their hands on the franchise despite not paying their promises. But it's not a bailout.

What about DfT and Network Rail not sticking to their contractual obligations. You seem to miss this out of your rants..... surprisingly.

 

[Marklund]

What about DfT and Network Rail not sticking to their contractual obligations. You seem to miss this out of your rants..... surprisingly.

Have they failed to deliver their part of the deal as of today?
I'm under the impression that these enhancements are in the future, and so far DfT and NR haven't failed to meet their end of the deal.
Perhaps you could correct me if I'm wrong.

 

[TUC]

Because they are a business which has failed to honour a contract. Happy to take the profits when they are there but as soon as there is a loss they do a runner because they can.

After NEx and the East Coast didn't DfT say they would look into setting requirements in future franchises that would enable parent companies of failed franchises to be banned from bidding in the future (having found they could not do thst in Nat Ex's case)?

 

[47271]

What's the old Japanese for 'Gone West' I wonder?

 

[FQTV]

They may not have as much money to spend, which can make them not wish to travel. Some of VTECs price rises haven't helped either, but it's a variety of factors.

It might be worth looking more broadly.

From the Office for National Statistics, via Visit Britain, reporting on the spend of inbound visitors to the UK:

https://www.visitbritain.org/latest-monthly-data

• Spending: October 2017 spending rose 1% compared to October 2016 to reach £1.9 billion. But with record results in each of the first nine months of the year, inbound visitors’ spending still shows record results for the latest 3 and rolling 12 months to October 2017: international visitors spent £7.2 billion in August – October 2017 (up 6% on the same months in 2016). The record setting continues over the first ten months of 2017 with inbound spending up 10% on January – October 2016, to a record £20.9 billion, and over the past 12 months, with £24.5 billion spent between November 2016 and October 2017, the highest ever rolling 12-month period.

The likelihood is that the better exchange rate (for inbound visitors) has helped this.

The East Coast Main Line links the biggest inbound tourist gateway (London) with major other tourist destinations, including York and Edinburgh.

What has Virgin Trains East Coast done to actively market to these overseas visitors, and how might the new website and general marketing, with its 'Waheys' and its 'Ooh Awkwards' and myriad other examples of impenetrable colloquialisms and the vernacular, help non-native English speakers feel comfortable and encourage them to book and travel?

Or, alternatively, they could go to ba.com, have the website (or a simplified version) presented in their own language, fly to Edinburgh for £39 and miss out York.

If the best is to be made of the ECML, then surely all opportunities should be maximised. Critically, though, the opportunities must be identified and, as others here have observed, that does not appear to have been Virgin Trains East Coast's strategy.

 

[SaveECRewards]

DOR had rewards that filled the seat. Passengers feeling the benefits from rewards are often likely to be return customers.
Seatfrog doesn't encourage much reward, and is too convoluted.

It's worse than that, people start to think of first class as something you get cheaply. But perhaps that's what they wanted, a new generation of leisure travellers who've not experienced the full service and so are happy paying £10 to Seatfrog for a sandwich in a box and the opportunity to take a selfie in a seat with 'first class' clearly splashed on it.

I'd agree with that. I used to spend a *lot* of money on EC when I worked in London and had a partner up here. VTEC came along and the rewards for my spending dried up. Nectar points are worthless.

What really did it for me was my girlfriend, who spent slightly less than me, getting rewards by VTEC that I was never offered. What a way to reward custom.

The Rewards scheme was pretty close to an airline scheme, and it rewarded the high spenders. You got back what you put in. And it was at a marginal cost.

Seatwave, though? Really? How does that reward or encourage the high spenders?

Exactly, 2016 I spent over £6k with VTEC didn't receive a single reward. In 2017 my spend on the VTEC website was less than £1k and there was a few months where I hadn't booked anything at all direct on their website, this was the time when the 3 month lounge pass landed in my email. With Rewards you could buy a lounge pass with points so those who travelled frequently could choose to reward themselves with a lounge pass. With British Airways frequent travel will get you to silver which is the level that you get lounge access for yourself and a guest, EC Rewards could compete with this, VTEC can't.

I had to spend £1000+ to get a "free" first class return. The marginal cost seat (redemptions only ever were available for seats in the lowest tier) was the reward for my custom.

Seatfrog rewards the one-off passenger after a cheap ticket and demeans those who've paid market rate for the first class product. It's just sleazy.

They did say to me that they believed that they were losing a lot of sales where people were using their free tickets when they would otherwise have purchased them. Of course that'll happen (although for me I tended to use them for extra trips - places like York and Lincoln see a lot less of me now) but the free tickets may cause those with discretionary spend to choose the train over another means of travel. For those who do a lot of standard class business travel the Rewards scheme would mean you could occasionally treat yourself to first class.

If I look at BA Executive Club, for shorthaul flights they have 'Reward Flight Saver' where you have to pay points but also a cash amount to cover taxes and fees. This is capped at £17.50 each way for short haul economy (longhaul there's no cap) and £25 each way for short haul business class. EC Rewards were better in the sense they were truly free, but the £17.50 doesn't actually cover the airport fees at Heathrow, never mind the taxes so BA is losing money on each redemption but they still consider their loyalty scheme as a key driver in encouraging business.

 

[Agent_Squash]

It might be worth looking more broadly.

From the Office for National Statistics, via Visit Britain, reporting on the spend of inbound visitors to the UK:

https://www.visitbritain.org/latest-monthly-data



The likelihood is that the better exchange rate (for inbound visitors) has helped this.

The East Coast Main Line links the biggest inbound tourist gateway (London) with major other tourist destinations, including York and Edinburgh.

What has Virgin Trains East Coast done to actively market to these overseas visitors, and how might the new website and general marketing, with its 'Waheys' and its 'Ooh Awkwards' and myriad other examples of impenetrable colloquialisms and the vernacular, help non-native English speakers feel comfortable and encourage them to book and travel?

Or, alternatively, they could go to ba.com, have the website (or a simplified version) presented in their own language, fly to Edinburgh for £39 and miss out York.

If the best is to be made of the ECML, then surely all opportunities should be maximised. Critically, though, the opportunities must be identified and, as others here have observed, that does not appear to have been Virgin Trains East Coast's strategy.

Please read my post again; I stated that that was one of a variety of factors.

 

[neilm]

What about DfT and Network Rail not sticking to their contractual obligations. You seem to miss this out of your rants..... surprisingly.

No 'upgrades' were due yet. These were due to come with the IEP Trains, when the premium payments got even higher.

They failed early on to get the revenue they expected before the upgrades. Knew it was not going to happen so jumped now before they lost even more money.

 

[Jonny]

Sorry, I'm curious as to what upgrades were due and when???

 

[FQTV]

Please read my post again; I stated that that was one of a variety of factors.

To which I have added another.

 

[bnm]

Wasn't "Voyager" created by Bombardier with Virgin in mind, but presumably Bombardier retained the rights to the name ?

Azuma (which I agree is a truly dreadful name) was just developed by VTEC. Hitachi have never used the name IIRC.

There is no trade mark for 'Voyager' relating to the Class 220/221s listed with the intellectual Property Office. Therefore anyone is free to use the name. As CrossCountry do.

The trade mark 'Azuma' is owned by Inter City Railways Limited. A subsidiary of Stagecoach Group.

 

[alexl92]

Well that Hornby model of the Virgin/Hitachi 800 is certainly going to be even more pointless now lol

Hah! Although actually, you have a model of a train that did test runs in the livery of a company but (probably) will never make it into passenger service in those colours - it could become a collectable! (More likely it'll go the way of their Javelin model - desperate sell-offs in every end of year sale for the next just to clear the first batch)

 

[OxtedSignaller]

Can’t see Stagecoach/Virgin being interested in running it on a not for profit basis they are a business after all and unless they are blackmailed into it by the DfT it would make no sense I’d be as equally sceptical about a concession like GTR Just look at how much of a hit Govia have taken and all the problems that’s arisen with them carrying out the governments every wish and command. Difference is they don’t have the Virgin brand at stake which however much everyone moans about they aren’t doing particularly badly the monopoly they’ve had on the West Coast all this years won’t be something they want to give up that easily and risk the bad PR coming from this concession on.

 

[Starmill]

It is rumoured that Arriva haven't asked for reimbursements from the government for losses incurred by industrial action as it would have to pay the government back if it throws in the franchise.

I keep hearing this rumour. It's still nought but a rumour but it's coming from several different mouths.

 

[JaJaWa]

There is no trade mark for 'Voyager' relating to the Class 220/221s listed with the intellectual Property Office. Therefore anyone is free to use the name. As CrossCountry do.

The trade mark 'Azuma' is owned by Inter City Railways Limited. A subsidiary of Stagecoach Group.

Interestingly Arriva (GC) recently bought the Adelante trademark from First (GWR) https://trademarks.ipo.gov.uk/ipo-tmcase/page/Results/1/UK00003229122.

What's the old Japanese for 'Gone West' I wonder?

Azuma'd

Here are some thoughts and question on what happens now:

1) Will this finally mean renationalisation? Answer: no, this is Grayling we're talking about. The Government won't take it back into state ownership even temporarily if it could work towards building a greater case for nationalisation, so...

2) We're probably looking at another tendering process. So who will be bidding? Virgin, again, in a majority stake? Stagecoach on their own, seeking to start afresh? I imagine that First will properly make their move now. Perhaps Arriva will take hold of the franchise - in which case, integration with CrossCountry would be interesting - or maybe an entirely new franchisee? Or even someone mad like Abellio?

FirstGroup, Keolis/Eurostar and Stagecoach/Virgin were announced as the shortlisted bidders for the current franchise, and today Arriva, Abellio, First/Trenitalia, Stagecoach were announced for the new East Midlands franchise.

Many European governments are getting concerned about the promises their rail companies have signed up for in the franchises they've won. It'll be interesting to see who else has over promised, expecting a nice pot of gold at the end of the rainbow...

Dutch fear their taxpayers will suffer for UK rail ‘adventures’: https://www.thetimes.co.uk/article/...-will-suffer-for-uk-rail-adventures-k0zwj97gj.

 

[MarTrainDriver]

I'm currently in a talent pool awaiting a start date to be a trainee train driver with VTEC. Therefore I'm in limbo due to the current situation. Is it fair to say that the latest news is the final nail in the coffin or should I still retain some hope? What has happened to potential trainee drivers in talent pools in the past where TOCs have lost the franchise?

 

[bnm]

ECML procurement may be broken - the system generally isn't.

Connex South Central gave up early, failing to see out their franchise term, selling up early to the oncoming franchisee.

Connex South Eastern failed and the franchise was run by HMG.

FGW/GWR refused a contract extension because of back end premium payments, yet HMG continues to give First Group direct awards.

Inter City West Coast's franchise tender in 2012 was cancelled folllowing a legal challenge from the encumbant.

National Express has given up on UK rail altogether.

Direct Awards abound, bypassing this supposedly unbroken 'system'.

Constant changes on the government side of things. Director of Passenger Rail Franchising, Strategic Rail Authority, DfT directly, Office of Rail Passenger Services. Each one tinkering with the 'system' to no great success.

Oh, and the foreign state railways are starting to realise that involvement in UK rail in its current setup is perhaps not such a good thing after all. Difficult questions are starting to be asked in Germany and the Netherlands. France (SNCF) has decided not to bother bidding again for 'classic' franchises and is reassessing its involvement in the HS2 bid.

Yup. The 'system' is all fine and dandy.

 

[SaveECRewards]

I'm currently in a talent pool awaiting a start date to be a trainee train driver with VTEC. Therefore I'm in limbo due to the current situation. Is it fair to say that the latest news is the final nail in the coffin or should I still retain some hope? What has happened to potential trainee drivers in talent pools in the past where TOCs have lost the franchise?

Don't give up, there may be a delay but they will still need trainee drivers and there's no reason for any new operator to restart the recruitment process. The people doing the recruitment are likely to be the same people whether the franchise continues to be run by the government, VTEC or another company.

The only people who will change will be senior management, other employees of the company are protected which will include the HR/recruitment people working on this.