East Coast Franchise

DarloRich said:

It is sold on the cheap in my mind because the private company will take all the money and return very little to the government, despite what is published.

Lets not forget that EC paid the government £220m last year on a 4.5% passenger journey increase. Every penny of that goes to the government, not shareholders or covering group company accounting arrangements or fat cat bonuses that oddly wipe out most of the profit. They seem to be doing very well yet they have to be got rid of? Why is that? They are certainly doing better than the last, private, incumbent

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With the new trains on the East Coast route, you should look forward to all that profit disappearing as they have to pay overpriced leasing costs for the new trains.

If the TOC's were to procure the trains, rather than the government, they would have gone for an existing type of train which would have been far cheaper and thus the government would have seen more money returned to them. However, as has been reported by several industry experts, they are expecting the franchise payments to the government to fall of a cliff.

WatcherZero said:

East Coast benefitted from the investment made by its predecessor (3m extra seats and speed improvements kicked in from May 2011, altogether 13% increase in daily operated services) a tenfold increase in meal consumption and 21% increase in first class passengers by making meals complimentary to first class since 2010 (investment in catering facilties made by predecessor).

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The revamp of the timetable was done by DOR, the change in first class provision was done by DOR, the Mallard refurbishment programme was started by GNER, continued by NX and finished by DOR (but was actually carried out and paid for by HSBC Rail).

It also cancelled planned route investment and fleet investment (five 180's and a Pendolino planned to be leased with accompanying increase in services were cancelled). It also started charging £5 per hour for the previously free wi-fi.

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DOR binned the Lincoln trains, true, which is what the 180s were going to be used on. There was never any intention to use a Pendolino, despite the fact the "new" Pendolino was tested on the ECML before it went into service with Virgin.

They now charge for wifi in standard class- as GNER did- but they also don't charge £5 to reserve a seat. So swings and roundabouts really.

Simon11 said:

With the new trains on the East Coast route, you should look forward to all that profit disappearing as they have to pay overpriced leasing costs for the new trains.

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Ah, the good old Insanely Expensive Project. A train that we don't need, that isn't as good as what we have now, and that costs too much money. Classic civil service planning.

YorkshireRider said:

I'm lost? DOR took over EC in Nov 2009. It was DOR who launched the new timetable and the free meals/drinks were launched at the same time (May 2011). They provided all the investment in the catering (extra staff and re fitted kitchens). Then there was the huge back log in train maintenance that NX left which DOR had to deal with. Yes they cut back the Lincoln services, and cancelled the 180s but a Pendo was never in any previous plans. Some testing was done on the ECML but that is all. NXEC left a huge mess to clean up and DOR have done a pretty good job in doing it.

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Infrastructure and planning work to allow it was done by its predecessor with Network Rail, the only change DOR made to the plans they inherited was cancelling the Lincoln services which they said saved £9m a year. At the time having just taken over the Government was leaning on them to cut future investment and just ride out the uplift from previous investment.

17/06/2010

Train operator East Coast has today announced a number of amendments to the planned introduction of a new timetable from May 2011.

Under the amendments, most of the planned new London King’s Cross – Lincoln services will now operate between King’s Cross and Newark, with one through train per day in each direction between Lincoln and King’s Cross. As a consequence, it will not be necessary to introduce an additional fleet of trains (five Adelante Class 180s), and the daily service to and from Lincoln/King’s Cross will be resourced from within the existing East Coast fleet.

The amendments to the timetable changes proposed will result in a net saving of £9 million per year compared to the original plans.

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http://www.mediacentre.eastcoast.co...ast-coast-eureka-timetable-proposals-238.aspx

LNW-GW Joint said:

East Coast has the cream of the inter-city routes, without having to run any regional/local services.
Virgin West Coast picked up the loss-making XC Birmingham-Scotland services, and FGW picked up the Thames Valley and Wessex locals, so there's no direct comparison.

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Cream? VT present themselves as the cat that got the cream!

Virgin run the "cream" of the west coast, which has been the subject of a massive upgrade during the life of their franchise, they use much newer trains, with higher passenger satisfaction ( bull clearly baffles brains) and they run only express trains. Why are they not a fair comparison? Surely they would be much more efficient and require fewer subsidies than the monolithic and inherently inefficient public sector?

Is there anything we can compare EC to? Perhaps someone could offer a suitable metric? Is it the paint scheme? What about the tea in the buffet? Perhaps it could be the size of the guard’s hats? Or is it easier simply to be an apologist and turn a blind eye to the truth? Why are there so many apologists for such a broken system? Why can people not see they are being ripped off here?

East Coast returned £220m last year. I will ask again, how much did Virgin pay back last year? How much will the new operator pay back? This franchising is wrong. We all know it but most seem happy to acquiesce.

WatcherZero said:

Infrastructure and planning work to allow it was done by its predecessor with Network Rail, the only change DOR made to the plans they inherited was cancelling the Lincoln services which they said saved £9m a year. At the time having just taken over the Government was leaning on them to cut future investment and just ride out the uplift from previous investment.

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If all East Coast have done is ride the wave of someone else’s work why did National Express throw in the towel?

DarloRich said:

East Coast returned £220m last year. I will ask again, how much did Virgin pay back last year? How much will the new operator pay back? This franchising is wrong. We all know it but most seem happy to acquiesce.

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How much would a private sector company have paid if it had come in under identical circumstances? We don't know, but I would have a bet that it would be a pretty similar amount.
The new operator will almost cirtenly pay less, because it will have to pay for IEP, which will for better or worse cost more than what they have now.

DarloRich said:

If all East Coast have done is the wave of someone else’s work why did National Express throw in the towel?

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Because they didn't see the recession coming?

Because immediately after the 2008 recession revenue dived below the companies and governments projections. A expected £30-40m annual increase in revenue that was pre recession only falling £10m short of target dived into a £30m annual fall in revenue.

DOR summed it up into their evidence to Parliament after taking over.

14. Directly Operated Railways told us that, on the East Coast franchise, discretionary business and leisure travellers account for some 96% of passenger revenues. Without a large and relatively stable revenue stream from commuters, forecasting passenger revenues for the franchise in an economic downturn is therefore particularly difficult.

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Check the table on page 20
http://www.nao.org.uk/wp-content/uploads/2011/03/1011824.pdf

As you ask about Virgin,

Financial information: in 2013/14 paid a premium of £101.2 million, equating to a subsidy of -1.6 pppkm (pence per passenger km); total premia paid to the government over the duration of the franchise was estimated be £933.5 million.

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For the next three years direct award its been set at £150m +all extra revenue.

Virgin franchise operating + network costs 1100m East Coast 700m, passenger km Virgin 3.8m East Coast 3.2m, cost to transport a million passenger km Virgin £289m, East Coast £219m, which with 3m passengers suggests East Coast should be returning £220m more to government than Virgin simply from being a less expensive franchise to operate, did they return £220m than Virgin? No they didnt, they were £100m less profitable for Government for the service they have been tasked to operate.

higthomas said:

How much would a private sector company have paid if it had come in under identical circumstances? We don't know, but I would have a bet that it would be a pretty similar amount.
The new operator will almost cirtenly pay less, because it will have to pay for IEP, which will for better or worse cost more than what they have now.

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It is a simple question that no one seems to want to answer. How much did Virgin pay back to the government last year? Was it more or less than East Coast?

higthomas said:

Because they didn't see the recession coming?

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The rescission that is still going on in many areas sderved by East Coast? Sorry, more excuses for being ripped off by greedy private enterprise.
--- old post above --- --- new post below ---

WatcherZero said:

Because immediately after the 2008 recession revenue dived below the companies and governments projections. A expected £30-40m annual increase in revenue that was pre recession only falling £10m short of target dived into a £30m annual fall in revenue.

DOR summed it up into their evidence to Parliament after taking over.


Check the table on page 20
http://www.nao.org.uk/wp-content/uploads/2011/03/1011824.pdf

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So the much vaunted private enterprise gods got their figures wrong, panicked and chickened out. The government are left to bear the risk of failure as National Express walked away almost free of penalty. The government are left to pick up the pieces, make a success of the franchise and then you all seem happy to have it taken off us to be given back to the same failures of a few years ago?

Am I the only person who sees the fault in this logic?


I would also counter the argument that there has been a recovery form recession in many of the areas served by EC
--- old post above --- --- new post below ---

WatcherZero said:

Because immediately after the 2008 recession revenue dived below the companies and governments projections. A expected £30-40m annual increase in revenue that was pre recession only falling £10m short of target dived into a £30m annual fall in revenue.

DOR summed it up into their evidence to Parliament after taking over.


Check the table on page 20
http://www.nao.org.uk/wp-content/uploads/2011/03/1011824.pdf

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So the much vaunted private enterprise gods got their figures wrong, panicked and chickened out. The government are left to bear the risk of failure as National Express walked away almost free of penalty. The government are left to pick up the pieces, make a success of the franchise and then you all seem happy to have it taken off us to be given back to the same failures of a few years ago?

Am I the only person who sees the fault in this logic?


I would also counter the argument that there has been a recovery form recession in many of the areas served by EC

higthomas said:

How much would a private sector company have paid if it had come in under identical circumstances? We don't know, but I would have a bet that it would be a pretty similar amount.

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On what basis would you think that? Of the other long-distance operators, First Great Western handed the keys back and took a management contract, East Midlands Trains sued DafT for more subsidy and Virgin Trains is on a management contract too.

If you factor in a 5% profit margin for a private operator, it is clear that DOR makes the best financial sense. But ideology trumps finances, as Economics George will tell you

Its 3% profit margin for a private rail operator compared to 11% for bus operators, retailer 5-10%. So should we nationalise shops because they have higher profit margins than rail companies?

WatcherZero said:

As you ask about Virgin,

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That statistic seems to show that Virgin are approaching £1bn in payments to the government over the course of their time operating the franchise, which unless I'm mistaken, is 17 years. If, as DarloRich says, East Coast are approaching £1bn in government payments for their time operating the franchise, they have made the same payment in 5 years. That is HUGELY in favour of East Coast in terms of which company has made more payments to the government, and means that East Coast is undoutbledly returning more to the government, hence the railway, than Virgin.

In all other areas (performance, popularity and so on) the two companies are roughly comparable, if anything with East Coast taking a slight lead. In general, this seems to me that the re-privatising of East Coast is daft.

DarloRich said:

Am I the only person who sees the fault in this logic?

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No I do agree with you

As for the argument that East Coast's success is down to the franchise previously being operated by the private sector, I countered that argument in the last Nationalisation VS Privatisation argument and asked for proof of the contrary; the comeback was proof by assertion; that it's success is down to being previously managed by the private sector purely because "It IS"... lets not repeat that argument.

WatcherZero said:

Its 3% profit margin for a private rail operator compared to 11% for bus operators, retailer 5-10%. So should we nationalise shops because they have higher profit margins than rail companies?

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Given that the railway, overall, is subsidised to the tune of 7p per passenger mile, we should be choosing the option that provides the best value to the taxpayer. All things being equal, DOR are 3-5% better value than a company that has to provide profits to shareholders. DOR have provided demonstrably better returns than either their predecessors- who both went bust- or their peers on other long-distance intercity routes.

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Is there a specific date set for the announcement in November ?

al.currie93 said:

That statistic seems to show that Virgin are approaching £1bn in payments to the government over the course of their time operating the franchise, which unless I'm mistaken, is 17 years. If, as DarloRich says, East Coast are approaching £1bn in government payments for their time operating the franchise, they have made the same payment in 5 years. That is HUGELY in favour of East Coast in terms of which company has made more payments to the government, and means that East Coast is undoutbledly returning more to the government, hence the railway, than Virgin.

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Though during that time Virgin suffered the farce that was West Coast Route Modernization and then a deep recession. East Coast on the other hand inherited a route which has undergone only small scale upgrades that have not caused significant disruption and started on the tail end of the recession.

Just some factors to add context and to remind that it wasn't 17 years of plain sailing for Virgin.

Robertj21a said:

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Is there a specific date set for the announcement in November ?

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Nope! We sit and await the DfT's pleasure!

ainsworth74 said:

Though during that time Virgin suffered the farce that was West Coast Route Modernization and then a deep recession. East Coast on the other hand inherited a route which has undergone only small scale upgrades that have not caused significant disruption and started on the tail end of the recession.

Just some factors to add context and to remind that it wasn't 17 years of plain sailing for Virgin.

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Virgin did suffer complications from the works because of that upgrade, and did operate through more of the recession than East Coast. But East Coast did inherit a mess from NXEC and GNER, and did still operate through a sinificant chuck of the recession. Also I sincerely doubt that those reasons were the deciding factor between making £1bn in 5 years and making the same amount in 17 years.

So that given, I still cannot see a valid reason for privatising East Coast.

Virgin's current direct award was for 2yrs 9months and over that they will pay £430m plus additional profits over a certain amount (not sure of the exact amount)

Because that £1bn is after the introduction of the Pendolino fleet and the increased track access payments to pay for the WCML route modernisation, its developing a quantum improvement and still generating a return to the taxpayer.

If Dor was still in charge when a major investment program took place on East Coast such as IEP or the GWML upgrade, would it still be returning £1bn over 5 years to the Government?

Orr, poor National Depressed, they thought the economy would just keep growing and growing, and passenger numbers keep rising and rising, it's not like recessions have ever happened before is it? :roll:
I wonder if the DFT were made to do their sums again in the same way they did in the west coast debacle a similar conclusion would have been come to?
There were loads of cancellations in the first few months of DOR ownership as trains simply had to be taken out of service, they were not fit to run.

I assume due to NXs poor job of looking after them? I recall the reliabilitty of the 91s being one issue, what were the others? a relivant discusssion me thinks as if the new team screw it up again then we could see a repeat?

I am primarily a passenger and have no strong views on whether the services are publically or privately operated.

My experience is that GNER were the best operator NX the worst and EC are in the middle (closer to GNER).

As a procurement specialist I often include internal bids when I am carrying out an outsource so the contract can be let on merit and any debate on whether internal or outsourced solutions can be objectively answered. Most times it is an outsourced proposal that wins but for East Coast it could be different as it has been running as a business already.

Of the three bidders I have had good experiences with First Group and Eurostar but my view on Virgin are clouded by the Pendalinos which I find claustrophobic

Arctic Troll said:

If you factor in a 5% profit margin for a private operator, it is clear that DOR makes the best financial sense. But ideology trumps finances, as Economics George will tell you

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5% is a high profit margin for a TOC, often its nearer to 3%, it doesn't take too much civil service incompetance to make nationalised rail worse value for money. I think there needs to be more financial liability for TOC owners, Franchises should be owned by the main company e.g. Stagecoach or a least the main company should be financially liable if they pull the plug and DOR has to step in. I think allowing DOR to bid for franchises is a good idea, they will win some and not others and add extra competition.

Arctic Troll said:

Ah, the good old Insanely Expensive Project. A train that we don't need, that isn't as good as what we have now, and that costs too much money. Classic civil service planning.

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Great example of how a private company taking a 3-5% profit could provide better value for money for taxpayers than a government run service. It will be interesting to compare IEP with Alliance Rail's planned tilting trains (5 car for GNWR and GNER Bradford to London, 9 car for GNER Edinburgh to London). If they get the access rights and build the trains I bet their trains will be better value for money.

My personal preference is for a system were the government sets a basic service level for every station and every station is covered either by a franchise or as a "covering area" for a franchise. The minimium level of service would be lower than now and would be provided by franchises services if open access opperators do not want to run services on that line. Open access opperators would have to give notice to end services (perhaps having to pay a behavior bond to get access rights to make sure they didn't just stop), in this circumstance the franchise opperator would then extend their services to the area at a payment or subisdy agreed when the franchise was awarded.

Under my system id scrap the WCML and ECML franchises once HS2 Phase 1 (WCML) and Phase 2 (ECML) are completed, making covering the job of regional franchises. Until then WCML could have Liverpool, Manchester (reduced to 2) and the North Wales services to have a viable franchise. Birmingham-Scotland could be transfered back to XCountry meaning WCML mainline was not used by the franchise holder in normal circumstances north of Crewe. It would provide 1tph of capacity for Piccadilly to London open access services to provide real competition and another 1 tph to open access opperators to provide Scotland-London competition (if the access rights were split between two or more open access opperators). It would mean new legislation to enable NR to charge more than marginal cost to open access opperators and they would need to get a good management accountantcy company in to get a more competant grasp of their costs to charge more fairly.

If First win the ECML franchise it will be interesting to see how they treat First Hull Trains. If they fund Selby-Hull electrification in return for a very long access agreement e.g. 20-30 years, then Hull Trains potentially becomes more important than "First East Coast" because it has a long term future. I can imagine they will take the oppertunity to push for allot more train paths while they can guarentee no franchise holder opposition. It would make sense to try to push for 1tph between Hull and London and have another go at setting up First Harrogate Trains or something similar.

I firmly believe FirstGroup Plc should be awarded the franchise.

(All the previous private owners went belly up)


......3rd times a treat :P

Reference was made in the Commons yesterday about an announcement in "December".
The specific context was on the need for a direct link between London and Cleethorpes, but I take it the remark by Claire Perry related to the ICEC contract.
You can see the exchange as Question 10 in the linked video for yesterday's Transport Questions proceedings (Thur Oct 23) : http://www.parliamentlive.tv/Main/Archive.aspx

There was also an exchange with Patrick McLoughlin on GW electrification costs (Question 9).
In his bumbling way, the Transport Sec insisted the project would meet its budget, but did not mention timescale.

AndrewP said:

I am primarily a passenger and have no strong views on whether the services are publically or privately operated.

My experience is that GNER were the best operator NX the worst and EC are in the middle (closer to GNER).

As a procurement specialist I often include internal bids when I am carrying out an outsource so the contract can be let on merit and any debate on whether internal or outsourced solutions can be objectively answered. Most times it is an outsourced proposal that wins but for East Coast it could be different as it has been running as a business already.

Of the three bidders I have had good experiences with First Group and Eurostar but my view on Virgin are clouded by the Pendalinos which I find claustrophobic

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It's not really Virgin - it's Stagecoach with 90%.

When NX left the trail of destruction and neglect was all to see.
To save costs they slashed catering, slashed uniform spending, sold the historic HQ to a hotel chain and the list can keep coming.

To save cash they neglected 91 & HST mods/upgrades and depot maintenance, sets had faults running for months and customer facing faults rose sharply.

DOR have brought the ICEC franchise leaps and bounds ahead of where it was.

Robertj21a said:

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It's not really Virgin - it's Stagecoach with 90%.

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I know that but isn't the Virgin brand proposed - this is a different product to Stagecoach's product irrespective who actually runs it.

Suraggu said:

When NX left the trail of destruction and neglect was all to see.
To save costs they slashed catering, slashed uniform spending, sold the historic HQ to a hotel chain and the list can keep coming.

To save cash they neglected 91 & HST mods/upgrades and depot maintenance, sets had faults running for months and customer facing faults rose sharply.

DOR have brought the ICEC franchise leaps and bounds ahead of where it was.

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Its comparing one of the worst TOCs to one good performance by DOR, lets see how they do if First refuses a Great Western Extension. DOR should be allowed to bid for franchises (including in other countries) and be kept seperate from the DfT etc. There is a comparison with East Midlands Trains who inherited a poor fleet cobbled together from multiple franchises and out of lease stock but is doing a decent job.

If even half of Alliance and First Hulls access applications are accepted then there will be serious competition so whoever wins the franchise (to a less extent with First) will have to a decent job. Grand Central has done a decent job since 2009 to provide competition to DOR and that will have influenced DORs actions.

YorkshireRider said:

Orr, poor National Depressed, they thought the economy would just keep growing and growing, and passenger numbers keep rising and rising, it's not like recessions have ever happened before is it? :roll:

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True about recessions, but if NX thought their franchise wouldn't be affected by another recession they were in good company - Gordon Brown had declared "we have beaten the cycle of boom and bust".

LNW-GW Joint said:

Reference was made in the Commons yesterday about an announcement in "December".
The specific context was on the need for a direct link between London and Cleethorpes, but I take it the remark by Claire Perry related to the ICEC contract.
You can see the exchange as Question 10 in the linked video for yesterday's Transport Questions proceedings (Thur Oct 23) : http://www.parliamentlive.tv/Main/Archive.aspx

There was also an exchange with Patrick McLoughlin on GW electrification costs (Question 9).
In his bumbling way, the Transport Sec insisted the project would meet its budget, but did not mention timescale.

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DfT have informed East Coast that the new franchise winner will be announced in November.

LNW-GW Joint said:

Reference was made in the Commons yesterday about an announcement in "December".
The specific context was on the need for a direct link between London and Cleethorpes, but I take it the remark by Claire Perry related to the ICEC contract.

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She was talking about the Northern/TPE ITTs being published in December and PQQ bids being assessed.