Financial Difficulty at Northern?

Starmill · 10 Jun 2019

There seems to have been some media interest in the idea that there are serious financial issues at Arriva Rail North in recent weeks.

On 1st June The Times published an article that declared that the operator "faces the end of the line" with financial problems hinted at, although the article is behind the paywall so I can't read any more.

Today we have the Yorkshire Post, although be warned it's unclear if they have any sources other than TSSA which for obvious reasons isn't necessarily the most reliable:

Northern Rail on brink of collapse says union

The region’s biggest train operator is facing a cash crisis that has put it on the brink of collapse, a union claimed last night.

The Transport Salaried Staffs Association quoted what it said was a “senior rail industry source” which indicated that Northern Rail was “likely to go bust later this year”.

It said it was putting “substantive rumours in the rail industry” about a “serious financial crisis” at Northern into the public domain, in order to give the Government time to act and to ensure that passengers’ interests were protected.

A spokesman for the union told The Yorkshire Post: “Northern is running out of money. It could probably stagger on for another year, but that would raise questions about ongoing repairs, safety and the level of service.”

In January, Northern revealed a fall in annual pre-tax profits from £21m to £12.7m, for which it blamed lower than expected passenger growth caused by “adverse weather conditions” as well as last year’s timetable chaos and the effect of continued strikes by another union, the RMT.

The franchise received nearly £280m of taxpayer subsidies in its first year, a figure that was due to reduce over time as part of a Government commitment to ease the burden on the public purse. However, it emerged earlier this year that it had instead increased by around £11m. Northern said the extra cash was for “changes in services and other policy areas” it had been asked to implement.

https://www.yorkshirepost.co.uk/new...JyWyIanRN42rmftmGuCjKMMWXjwD_l5YjKI1lnX27U9w0

It seems clear to me that the reputation of the company among its customers has taken a serious knocking since the start of the franchise. The exceptional level of disruption created first by strikes and then by the May 2018 timetable change is almost certain to have reduced patronage. It remains to be seen how much of that patronage can be regained now that the service has somewhat recovered from those, and some modest but very welcome improvements were at last been delivered 3 weeks ago.

The truth seems to remain quite hidden for the moment.

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randyrippley · 10 Jun 2019

who is financing the new stock on order? Is that through a leasing company or through Northern's owners?

Andyh82 · 10 Jun 2019

I'm sure we have a thread saying that there are rumours Northern are about to either give the franchise back, or have it taken off them, at least once a week.

The papers and the unions both that a vested interest to keep this story rumbling on even if it was basically the same story reheated again.

Megafuss · 11 Jun 2019

I am not the biggest fan, but to be fair, the unions were bang on about Virgin Trains East Coast being trouble very close to the start of the doomed franchise. martin griffiths himself said they knew within the first week they were in trouble. It wouldn't have taken that long for that to filter to a union official.

ForTheLoveOf · 11 Jun 2019

Starmill said:
On 1st June The Times published an article that declared that the operator "faces the end of the line" with financial problems hinted at, although the article is behind the paywall so I can't read any more.

Here is the article. Nothing too dramatic, really.

The viability of the rail operator Northern is being investigated amid growing expectation that it will be the next train franchise to be renationalised.

The operator of last resort (OLR), a government arm that takes over ailing rail routes, is understood to be conducting due diligence on Northern, which has been hit by strikes, delays and last year’s timetable chaos.

Last week, city leaders from the north of England called for the vast franchise — which stretches from Liverpool to Hull and from Middlesbrough to Nottingham — to be taken back into state hands.

The OLR already runs the East Coast line, renationalised last year when Stagecoach and Virgin gave back the keys after overbidding for the right to run the route.

Northern’s finances are widely thought to be unsustainable. The German giant Arriva won the franchise in 2016 with a pledge to reduce its reliance on state subsidy. However, it has been beset by problems and bosses have tried to renegotiate the contract with the Department for Transport (DfT).

The OLR’s intervention at Northern is said to be precautionary, but raises concern about the government’s ability to run a franchise of Northern’s scale. It carries about 100m passengers a year, employs over 5,000 staff and runs about 2,500 services a day.

Other franchises, including TransPennine Express, Greater Anglia and South Western Railway, are also struggling after their owners bid on over-optimistic terms. Meanwhile, Deutsche Bahn is trying to sell Arriva. The DfT declined to comment.

quantinghome · 11 Jun 2019

I'd like to see the franchise come under control of transport for the north with commuter networks devolved to city regions.

In the meantime keep your eyes peeled on this company: https://beta.companieshouse.gov.uk/company/03076444. If it gets a name change it's a sign the franchise may be coming to an end.

yorkie · 11 Jun 2019

@Eric I'm sorry but I am not going to let this thread become a duplication of Media picks up on transport disparity between London and "the North"; please use that thread if you wish to discuss any disparities.

geoffk · 11 Jun 2019

Starmill said:
It seems clear to me that the reputation of the company among its customers has taken a serious knocking since the start of the franchise. The exceptional level of disruption created first by strikes and then by the May 2018 timetable change is almost certain to have reduced patronage. It remains to be seen how much of that patronage can be regained now that the service has somewhat recovered from those, and some modest but very welcome improvements were at last been delivered 3 weeks ago.

The truth seems to remain quite hidden for the moment.

Strikes and the May 2018 timetable change, plus the effect of voluntary Sunday working in the north-west, with regular cancellations, although I understand there has been an interim solution to this in recent weeks.

Megatracker · 11 Jun 2019

Afternoon all, just wondering what people's opinions were on this article posted by the Yorkshire evening post yesterday. Here's the link below to the article.

https://www.yorkshirepost.co.uk/new...ail-on-brink-of-collapse-says-union-1-9814414

"The region’s biggest train operator is facing a cash crisis that has put it on the brink of collapse, a union claimed last night.

The Transport Salaried Staffs Association quoted what it said was a “senior rail industry source” which indicated that Northern Rail was “likely to go bust later this year”.

With my applications currently moving forward for a position to work at Northern obviously this article is concerning. I understand that the tactics the media use can often be scaremongering or political nonsense so I am curious to what you guys think?

Thanks.

AndrewE · 11 Jun 2019

I wouldn't worry about the company's position, there will be a need for trains and people to man them and organise the show no matter who pretends to own it.
In my earlier railway years I did find repeated reorganisations and possible redundancies very unsettling, however I eventually realised that people (i.e. me and my colleagues) were still needed to do the work.

What was more worrying in later life was in the Civil Service when reorganisations were progressed with no real explanation of who was going to do exactly which bit of each job after implementation. I thought it was dishonest as the people doing the job just had to try to cover the work as best they could whilst management turned a blind eye to the shortage of resources. That's a real guarantee of stress - and worse - for the people in the hot seats and I wonder how some of them keep their minds. I guess the probation officers and Child protection social workers are in exactly this position these days.

Stigy · 11 Jun 2019

I think it’s naturally going to concern anyone with an application in as there’s possibilities of recruitment being frozen etc. I think the media (and RMT to an extent) do use scare mongering tactics sometimes. The RMT would do this to get people on side, when the reality is that it may not be as reported at all.

Starmill · 11 Jun 2019

ForTheLoveOf said:
Nothing too dramatic, really.

Indeed. It does sort of seem to me that nothing at all is happening to revenue except the most predictable of the outcomes that could arise from significantly degrading the timetable and the reliability of the service - even though many of the problems have now been solved. Especially during strikes, some people will have found their alternatives cheaper or more convenient, and will simply stick to them regardless of how good the rail service gets. It's impossible to see how the company could support revenue growth while offering that sort of service.

Some timetable changes downgraded the service but have been reversed, for example through trains between Blackrod or Adlington and Preston are now back. Others are not so; there used to be a proper half-hourly service towards Manchester at Mauldeth Road, Burnage and Gatley and this has been abolished and apparently cannot and will not now be restored, according to a letter sent by one of Northern's stakeholder managers to Jeff Smith MP. The effect of significantly above-inflation price increases is probably still working its way through, too. Many fares in Greater Manchester were doubled in 3 years.

Some of the enhancements that were launched in May will probably bring in many new customers, especially from places like Harrogate, Worksop and Chester, but it will be years before this feeds through into the financial results. Also, there has been a tacit abandonment of some projects, such as the second train per hour to serve Bramhall, Ponynton and Prestbury, which will presumably bring down revenue compared to forecast. Other 2017 enhancements, such as the second train per hour to Manchester from Altrincham, Knutsford, Northwich and others have still yet to be delivered.

td97 · 11 Jun 2019

I think most agree that Saturday loadings have recovered better than expected and in a shorter timeframe than expected. Certainly reflects my experience.
At least let ARN introduce their new trains to gauge whether that affects performance/reliability/customer satisfaction. It could end up being a turning point for Northern.
Otherwise, if it's still a mismanaged basket-case come January, with Pacers still in service, further failed franchise commitments, etc.; that would be the appropriate time for OLR to become involved.

underbank · 11 Jun 2019

td97 said:
with Pacers still in service

Doesn't that depend on circumstances outside the control of Northern? I.e. availability of units from other operators, NR approval of new trains, etc? NR electrification/infrastructure improvements?

I'm first to criticise Northern for things within their control, but you can't blame them for external factors.

td97 · 11 Jun 2019

underbank said:
Doesn't that depend on circumstances outside the control of Northern? I.e. availability of units from other operators, NR approval of new trains, etc? NR electrification/infrastructure improvements?

Staff training is likely to be the biggest caveat, unless there's a show-stopping fault/issue. All other cascaded units due have arrived. New trains have ORR approval. It's down to whether Northern can manage their introduction.

underbank said:
I'm first to criticise Northern for things within their control, but you can't blame them for external factors.

I'm fully with you on that

js1000 · 11 Jun 2019

Does this really surprise anyone? The reality is that passenger numbers are growing at 21 of the 24 rail franchises in the UK. The only 3 that recorded a fall between Q1 2019 and 2018 were Great Western Railway (-1.0%), Caledonian Sleeper (-2.3%) and Northern (-2.4%). Northern as a franchise is clearly not sustainable and Arriva, the DfT and Network Rail are all partly responsible.

Northern has been haemorrhaging passengers for a couple of years now on lines which have had extortionate non-annual price increases (proposed by the franchise and above RPI) and ill-conceived timetable changes. I personally know at least 5 people - all from different parts of the North West - who have stopped using Northern train services to/from work in the last 18 months. This is mainly due to unfavourable timetable changes from commuter stations (i.e. regular calling patterns at xx:00 & xx:30 to irregular patterns at xx:00 & xx:10) and increased cancellations/delays associated with timetable changes.

Northern have somehow destroyed their bread and butter which is a pretty remarkable achievement. The Saturday strikes were unhelpful but more structural problems associated with the Northern timetable. That's a serious problem.

Arriva will get their compensation for the failure to deliver infrastructure that was included in the bid prospectus, such as Piccadilly platforms 15 & 16. I reckon they'll probably look to jump ship when the new rolling stock is introduced as this will push up operating costs and any growth in passengers won't be immediate but over the course of a few years.

At least the Northern franchise finally gets some modern rolling stock which should encourage more passengers in the long-term and has a chance in the future if it is managed correctly by all parties.

Starmill · 11 Jun 2019

js1000 said:
Northern as a franchise is clearly not sustainable and Arriva, the DfT and Network Rail are all partly responsible.

I think it probably was on the path to sustainability in 2015. The Decemeber 2017 timetable was probably one of the best ever for the West. But an industrial dispute and a dumpster fire of a new timetable have probably now done years worth of damage, vastly out of proportion of any of the recent improvements.

Andyh82 · 11 Jun 2019

js1000 said:
Does this really surprise anyone? The reality is that passenger numbers are growing at 21 of the 24 rail franchises in the UK. The only 3 that recorded a fall between Q1 2019 and 2018 were Great Western Railway (-1.0%), Caledonian Sleeper (-2.3%) and Northern (-2.4%). Northern as a franchise is clearly not sustainable and Arriva, the DfT and Network Rail are all partly responsible.

Surely a 2.4% drop could be entirely explained by the Saturday strikes?

Also, regarding clockface timetables being messed about with, how would Arriva not operating the franchise fix that?

PR1Berske · 12 Jun 2019

underbank said:
Doesn't that depend on circumstances outside the control of Northern? I.e. availability of units from other operators, NR approval of new trains, etc? NR electrification/infrastructure improvements?

I'm first to criticise Northern for things within their control, but you can't blame them for external factors.

Exactly.

I'm no member of the Northern fanclub but I do get annoyed by the RMT et al who stir up a lot of ill feeling so like to apportion blame when it's clearly nothing to do with them.

XC victim · 12 Jun 2019

Whilst I don’t want to jump aboard anti-Northern bandwagon I do feel that all of Northerns current problems were entirely predictable;

Delays in new rolling stock The introduction of brand new rolling stock is often (ok nearly always) heavily delayed. And I always thought the timescale they were working to to get the new units designed, built and introduced was very optimistic.

Delays in cascaded stock Again the introduction of cascaded stock from other franchises was reliant on new build stock being delivered to other franchises and always likely to be delayed.

Dissatisfaction at Refurbished stock this could have been avoided if Northern had said all stock would be refurbished or refreshed rather than saying they would be “as new”

Strike action was extremely predictable especially given it had happened elsewhere.

Delays to infrastructure projects whilst Network rail may have been responsible it was always going to happen and surely Northern were aware of this.

Surely the real blame lies with the franchise system. Bidders for franchises are encouraged to make wildly over optimistic bids despite them being completely undeliverable. That way when things go pear shape it is the franchise holder not the DfT that gets blamed.

Greybeard33 · 12 Jun 2019

The BBC North West Today lunchtime news ran this as its lead story today. There was an interview with a TSSA rep, but he did not disclose the source of the union's information about ARN's financial situation. The reporter said he had approached Northern, but the company refused to deny that it was in trouble, in answer to direct questions.

Old Yard Dog · 12 Jun 2019

I'd be very sad if this leads to the Northern Connect network & launch being reduced or even cancelled.

DB · 12 Jun 2019

No idea whether this is related to Northern's alleged woes, but today I was on a newly-refurbished 158 (782 - ex Scotrail), and although it had new seats, carptet, etc, there were no USB sockets and the old tables had been retained. Have they downgraded the spec to save money? Not come across many with new seats, but this is the first one I've seen which hasn't had USB sockets.

scrapy · 12 Jun 2019

Old Yard Dog said:
I'd be very sad if this leads to the Northern Connect network & launch being reduced or even cancelled.

Work on the December 2019 timetable change was started months ago and would not be affected by a change of operator. Many 'Northern Connect' services such as Blackpool to York, Liverpool to Manchester Airport and Chester to Leeds are already running anyway just with older rolling stock. They will get the new stock when it's ready, and this wouldn't change with a new operator.

158756 · 12 Jun 2019

scrapy said:
Work on the December 2019 timetable change was started months ago and would not be affected by a change of operator. Many 'Northern Connect' services such as Blackpool to York, Liverpool to Manchester Airport and Chester to Leeds are already running anyway just with older rolling stock. They will get the new stock when it's ready, and this wouldn't change with a new operator.

It's too late to change the timetable for this December, and it's probably too late to get rid of the 195s, but it's certainly within the realms of possibility that in their efforts to cut costs or sweep away the influence of Arriva the new/nationalised operator will abandon the proposed additional services and any idea of a higher standard of service on the existing routes, and just stick the 195s in the random unit generator.

Puffing Devil · 13 Jun 2019

DavidB said:
No idea whether this is related to Northern's alleged woes, but today I was on a newly-refurbished 158 (782 - ex Scotrail), and although it had new seats, carptet, etc, there were no USB sockets and the old tables had been retained. Have they downgraded the spec to save money? Not come across many with new seats, but this is the first one I've seen which hasn't had USB sockets.

IMHO Public USB charging sockets have a useful life of < 12mth. Better to include 240v, robust, sockets for chargers.

The 319s now in service have lost any veneer of newness that they may have had where introduced and they are recognised as the slow, 30 year old, southern cast-offs that they are.

Bantamzen · 13 Jun 2019

DavidB said:
No idea whether this is related to Northern's alleged woes, but today I was on a newly-refurbished 158 (782 - ex Scotrail), and although it had new seats, carptet, etc, there were no USB sockets and the old tables had been retained. Have they downgraded the spec to save money? Not come across many with new seats, but this is the first one I've seen which hasn't had USB sockets.

Over on the Northern refurbishment thread it was said a while back that accessibility and general refresh works were prioritised over things like USB ports which can be fitted retrospectively. So I wouldn't read too much into this.

Djgr · 13 Jun 2019

Bantamzen said:
Over on the Northern refurbishment thread it was said a while back that accessibility and general refresh works were prioritised over things like USB ports which can be fitted retrospectively. So I wouldn't read too much into this.

It's just part of their general approach of over promise, under (or no) delivery.

New ticket machines-on one platform only
New trains-trapped in post delivery pre introduction hell (They look cheap btw)
Northern Connect-only exists buried away on their website
Seat reservations-um no
WiFi (Free or otherwise) - this is the North so nowhere to be seen.

Everywhere, everywhere cheap and shoddy

Bantamzen · 13 Jun 2019

Djgr said:
It's just part of their general approach of over promise, under (or no) delivery.

New ticket machines-on one platform only
New trains-trapped in post delivery pre introduction hell (They look cheap btw)
Northern Connect-only exists buried away on their website
Seat reservations-um no
WiFi (Free or otherwise) - this is the North so nowhere to be seen.

Everywhere, everywhere cheap and shoddy

I know it's almost ingrained into popular culture to moan about Northern, and they are behind with some facets, but on your points:

- More ticket machines are starting to appear at many stations
- I'm not sure what you mean by pre-introduction hell, many units are out testing, some even at staff training stages
- Connect was never going to be a priority until the new stock rolled out enough to cover the proposed routes
- Seat reservations were never a thing with this particular franchise, and will only be rolled out with Connect
- WiFi - Really, there's plenty out there already, with the rest to come with refurbishment
- As for cheap everywhere, like it or not the DfT require Northern to drastically reduce subsidies whilst also increasing capacity & updating stock. So something has to give, unless of course you'd like to see even higher ticket prices so that they can spec-up the interiors (which by the way most people I see & hear think are OK, if not spectacular)

There's lots of things wrong with the current franchise, some Arriva's making, others not. But a lot of the delivery issues have been beyond their control, and replacing something close to half their fleet with brand new stock when so many other TOCs are also ordering new stock and/or refurbishing existing, its hardly a surprise that things get delayed. And if anyone disagrees & thinks they could figure out better, then I'd suggest an intimidate change of career!!

quantinghome · 13 Jun 2019

Bantamzen said:
There's lots of things wrong with the current franchise, some Arriva's making, others not. But a lot of the delivery issues have been beyond their control, and replacing something close to half their fleet with brand new stock when so many other TOCs are also ordering new stock and/or refurbishing existing, its hardly a surprise that things get delayed. And if anyone disagrees & thinks they could figure out better, then I'd suggest an intimidate change of career!!

True to an extent. However, Arriva's plans basically relied on everything to go right, which doesn't happen in real life. There was no wriggle room for inevitable delays in new infrastructure, trains etc. They should have realised this. A more sensible approach would have been to get the refurbs done, introduce the new trains without changing the timetable and iron out any teething troubles. Then, once that was done, overhaul the timetable with a big marketing push for Northern Connect.

Financial Difficulty at Northern?

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