Cross Country New Franchise

[DenmarkRail]

Called it. Looks like no news today.

 

[HH]

I've been trying to find out who's bidding. Apart from the incumbent, no-one is admitting to an interest...

 

[CptCharlee]

Few years ago I heard Virgin were very keen on going after the crosscountry franchise soon after they lost it. And they were interested in putting in an aggressive bid.

However that was before all of the East coast drama.

 

[LNW-GW Joint]

Since 2012, Virgin don't bid as a majority shareholder, they have left that to Stagecoach (they only had a 10% share for VTEC, and have 30% of WCP).
So a lot depends on Stagecoach's appetite for new bids, after the reversal with VTEC.
They are still in control of VTWC (51%).

 

[Kite159]

I've been trying to find out who's bidding. Apart from the incumbent, no-one is admitting to an interest...

Could be that only Arriva can be bothered to submit a bid?

 

[DenmarkRail]

Before today, if someone asked me who I thought would be shortlisted, it would be:

Virgin / Stagecoach
Arriva
TRENITALIA

 

[HH]

Since 2012, Virgin don't bid as a majority shareholder, they have left that to Stagecoach (they only had a 10% share for VTEC, and have 30% of WCP).
So a lot depends on Stagecoach's appetite for new bids, after the reversal with VTEC.
They are still in control of VTWC (51%).

Yes, Virgin appear to lost appetite for Rail and just want to leverage the brand.

Stagecoach's recent appetite has been flavoured by their VTEC experience. If they could make a low risk, decent margin bid they would be interested; is that likely bidding against Arriva? I don't think so.

Trenitalia would need to partner with someone to have a chance IMO; the expertise required to put together a successful bid should not be underestimated.

 

[whhistle]

I wonder if only Arriva put a bid in, and made it really... uninspiring... whether they'd defaultly win anyway?

 

[Aictos]

Trenitalia would need to partner with someone to have a chance IMO; the expertise required to put together a successful bid should not be underestimated.

Maybe a joint bid with SNCF again as they did work together in 1995 to 2001 providing services between Italy and France with the Artesia brand so they have prior history of operating InterCity services together, this would be my wildcard bidder.

If not then would First be interested in bidding in partnership with Trenitalia?

 

[Jorge Da Silva]

Maybe a joint bid with SNCF again as they did work together in 1995 to 2001 providing services between Italy and France with the Artesia brand so they have prior history of operating InterCity services together, this would be my wildcard bidder.

If not then would First be interested in bidding in partnership with Trenitalia?

I doubt First or Trenitalia would bid as they are focusing on the West Coast.

 

[LNW-GW Joint]

Maybe a joint bid with SNCF again as they did work together in 1995 to 2001 providing services between Italy and France with the Artesia brand so they have prior history of operating InterCity services together, this would be my wildcard bidder.

They are at daggers drawn over open access in each other's country.
SNCF owns a key part of Italo, who run OA on high speed lines in Italy, and Trenitalia is promising to do the same to SNCF in France when OA arrives soon.
The proposed high speed line between Lyon and Turin is also mired in politics on each side.
SNCF has Keolis as a proxy in the UK (WCP aside).

 

[Mollman]

I wonder if only Arriva put a bid in, and made it really... uninspiring... whether they'd defaultly win anyway?

I think the DfT can extend the deadline if only one expression of interest were to be received

 

[HH]

I think the DfT can extend the deadline if only one expression of interest were to be received

Which would, of course, explain the current delay...

 

[OxtedSignaller]

I am confused as to what difference extending the deadline makes... we are talking about large multinational transport corporations here, I cannot imagine they are going to simply miss the first deadline.

 

[The Ham]

I am confused as to what difference extending the deadline makes... we are talking about large multinational transport corporations here, I cannot imagine they are going to simply miss the first deadline.

The only thing I can think of is that the DfT may wish to have a "bid" (probably a baseline assessment to match any bid they may get against) from their operator of last resort.

 

[CommuterPigeon]

I wonder if only Arriva put a bid in, and made it really... uninspiring... whether they'd defaultly win anyway?

Bidding for the Franchise hasn't started, this phase is just potential Bidders expressing an interest to the DfT that they would like to Bid and then the DfT announcing the shortlist of those who have passed their requirements (usually no more than 4).
There are rumours though that there has been very little interest in this Franchise which is not wholly surprising.

 

[Up_Tilt_390]

Why exactly might there be very little interest in the CrossCountry franchise? Is it the complexity and size of the network, the general rolling stock and overcrowding issues, or a variety of factors?

 

[NotATrainspott]

It may be fear of the "winner's curse". The one who wins the auction may be the one who overplayed their hand and becomes worse off than the people who didn't win the auction. Right now there have been so many high-profile franchise problems, coupled with the general economic uncertainty of Brexit and then the looming prospect of another rail franchising shakeup. I don't think anyone is currently desperate to run CrossCountry. If you'd be fine without it, then not bidding at all might be your winning strategy. Who would be so desperate to run a franchise that they'd risk a lot? The only companies I can see being interested from that perspective are ones wanting to gain experience of the UK passenger rail market, possibly using that as a jumping board to bigger and more profitable ventures like the HS2 operator. Even then though we've seen this happen mostly through joint ventures so far.

CrossCountry really is an unloved franchise. It's pretty much just a general mishmash of regional services without any profitable and compelling high-level traffic flows. Unlike other long-distance operators it's got a very tough time competing against regional flights and driving since the average speeds are so low.

 

[NoOnesFool]

Why exactly might there be very little interest in the CrossCountry franchise? Is it the complexity and size of the network, the general rolling stock and overcrowding issues, or a variety of factors?

At a guess, I would say it's partly due to the network itself, crossing lots of paths can lead to delays with widespread knock on effects elsewhere in the country. There is also probably the most important issue of profitability. Arriva XC, in recent times have made comparatively little profit - as opposed to other long distance operators.

 

[LLivery]

Why exactly might there be very little interest in the CrossCountry franchise? Is it the complexity and size of the network, the general rolling stock and overcrowding issues, or a variety of factors?

I'd say the XC network and the franchising system as a whole. The reputation of rail in this country is in a state, public opinion is very much against privatisation, continental operators are becoming more unwilling to invest abroad, Brexit uncertainty at least as far as the strength of the pound can't help, poor NR/government reliability on acutally getting infra investment done, usage is starting to fall and over-optimistic growth expectations has lead to operators are struggling to make money. Basically, the risk isn't worth the gain, I'm not surprised at all.

 

[The Ham]

I agree that XC is high risk.

However i as long asa company doesn't overbid then there's a chance it could succeed in being a good franchise for everyone.

As long as there's :
- some payments to the government (ideally in the firm of profit sharing with the percentage the government gets increases the better it performs, so that the better the franchise does the more that the government gets)
- longer trains so that all services are a minimum of 5 coaches and a minimum of 7 coaches through the core
- there's more places brought on to the XC network (chiefly Liverpool, most probably by running a pair of units through the core and splitting at Crewe)

On the profit sharing it could be the first £1 million a year the TOC keeps it all, then it's 10% of the next £1 million. Then for each £1 million the percentage the government gets increases by 5% until 50% then the rate of increase drops to 2% extra per million until 70% where it stops so that there's always an inventive to encourage extra growth. However to encourage investment past losses can be offset against the profits in any year.

As an example if an investment of £100 million was made then effectively no payments are made until £100 million in profits are made.

Note that investment in the likes of rolling stock doesn't count if there is an ongoing lease cost which impacts on the yearly finances.

 

[GrimShady]

Kick Arriva out and bring the entire franchise under Public control.

 

[The Ham]

Kick Arriva out and bring the entire franchise under Public control.

That would be sensible, so will never happen.

I couldn't see that there could be a strong case made for that to happen between about 2030 and 2040 when HS2 will significantly reduce the number of people using XC services. As such the Tories would never like it to be in state control for 15-20 years.

 

[LNW-GW Joint]

Kick Arriva out and bring the entire franchise under Public control.

It is already under public control.
The DfT specifies almost everything, including the timetable and its rolling stock provision.
They can reset the operation to any model they want next year.

 

[HH]

It is already under public control.
The DfT specifies almost everything, including the timetable and its rolling stock provision.
They can reset the operation to any model they want next year.

Precisely. Operators have very little room for manoeuvre, which means that if things go wrong (often caused by the government), there's not much can be done about it.

You may be unaware, but the Pension Regulator has decided that railway pensions are not adequately funded, which is yet another significant risk bidders (and incumbent TOCs) are having to deal with.

 

[Robertj21a]

Maybe a joint bid with SNCF again as they did work together in 1995 to 2001 providing services between Italy and France with the Artesia brand so they have prior history of operating InterCity services together, this would be my wildcard bidder.

If not then would First be interested in bidding in partnership with Trenitalia?

I can't see First being in a position to bid for anything at all nowadays.

 

[route:oxford]

Peppercorn bid?

Reminds me of the days of the ITV franchise auctions. Central Independent Television paying £2,000 for the franchise and Carlton paying £45,000,000

 

[GrimShady]

It is already under public control.
The DfT specifies almost everything, including the timetable and its rolling stock provision.
They can reset the operation to any model they want next year.

Then why bother with the private operator? Get rid of the middleman.

DOR did a wonderful job with East Coast only to be ruined by VTEC.

 

[tbtc]

Then why bother with the private operator? Get rid of the middleman.

DOR did a wonderful job with East Coast only to be ruined by VTEC.

Based on what?

Something quantifiable, like did DOR pay a higher premium than VTEC?

I remember them as a fairly uninspiring operator who cut back on NXEC's ambition (cutting plans for daytime Harrogate/ Lincoln services, handing over the 180s to Northern since they had no use for them) - not the worst TOC ever but they'd be remembered as quote boring were it not for the fact that they are a post-boy for the Nationalisation brigade.

 

[GrimShady]

Based on what?

Something quantifiable, like did DOR pay a higher premium than VTEC?

I remember them as a fairly uninspiring operator who cut back on NXEC's ambition (cutting plans for daytime Harrogate/ Lincoln services, handing over the 180s to Northern since they had no use for them) - not the worst TOC ever but they'd be remembered as quote boring were it not for the fact that they are a post-boy for the Nationalisation brigade.

From a customer point of view the onboard service was far superior which VTEC promptly set about ruining. The staff were much more satisfied with them as employers and happier as a result. None of VTEC bulls*** hip advertising/condescending attitude where doing you over was regarded as some sort of twisted improvement.

VTEC premiums was what got them into trouble in the first place so that's hardly anything to champion.

Could they have been more entrepreneurial..sure but I would rather travel with them any day over VTEC.