DfT: South Western Railway NOT Financially Sustainable

[talldave]

Why are less people traveling though? It can't surely be in the peaks as I see the trains looking rather busy. Is it leisure travel that is dropping

People working from home one or two days a week.

 

[Dr Hoo]

I'd forgotten about that report. Perhaps because it doesn't feel like anything has changed since it was written. Things may have happened behind the scenes though and change isn't going to happen overnight.

Did the problems in the north start later or get worse later than than in the South Western Railway region, given this report is out two years later than the other.

Probably too far ‘off thread’ but the timetable problems in the North in 2018 were also covered by the ORR-led ‘Glaister’ report to some extent.

Anyway; back to South Western...

 

[Snow1964]

People working from home one or two days a week.

In theory the franchisee is protected against this, as there is a Central London employment metric that affects the subsidy profile

Probably need to see a split of season tickets vs daily tickets vs pay as you go smartcard type tickets for last few years to understand how changes have trended and affected it.

Of course it is the old chicken and egg syndrome, had a reliable service been maintained, fewer would have considered working from home, but having strikes and unreliability, caused people to consider alternatives to commuting 5 days a week.

Sorry, not old enough to know the effect when 5.5 day working week (including Saturday mornings) transitioned to 5 days in 1950s

 

[kristiang85]

In my experience of the last couple of years:
- Trains on Mondays and Fridays are noticeably quieter (especially the Fridays), which lends itself to the theory of people working from home / reducing their FTE on these days.
- I have to now have a really really good reason to go into London at the weekend, as the trains are just too unreliable, or too often affected by engineering. I presume this multiplies itself over many people, and families with cars will just cut their losses and use them. Lately, when I have gone into London, I've got into the habit of going via Reading with GWR, as it is much more reliable.
- Given the number of delays, they must be shelling out a lot on delay repay and other compensation. Not to mention the hiring of more and more staff to deal with the volume of claims.
- The number of broken trains / tech faults with the trains just seems so much higher than on any other major TOC. But this is from personal observation, rather than any hard facts which others might have. This must add to their maintenance costs.

 

[47421]

In theory the franchisee is protected against this, as there is a Central London employment metric that affects the subsidy profile

Yes but in practice the Central London Employment adjustment mechanism is not working as First Group (or Abellio who have the same complaint re GA) expected - apparently the CLE stats are showing employment growth at a higher rate than SWT and GA are seeing commuting numbers increase. No one knows why for sure, possibly more working from home or possibly higher proportion of new hires coming from London itself rather than SWT / GA commuterland. GA accounts say they are in dispute with DfT about how the CLE adjustment works, but no doubt DfT will say "this is what you signed up to in a very detailed, extensively negotiated 700 page plus agreement, and it is too late to say you dont like what you agreed to now".

 

[Clarence Yard]

GWR under direct award 5? is effectively a concession rather than a franchise with DfT defining the outputs and GWR responsible for delivery. The management contracts post 2013 will in end see the franchise having operated for longer under management contracts than the original franchise term. I could see the management contract / concession model as used with VTWC and GWR being the ultimate replacement of franchises. TPE and SWR are franchises that appear to have overbid on unrealistic promises, undoubtedly needed to secure the franchise award. IHMO DfT franchising has been rotten to the core from circa '11.

No - a direct award is different to a management contract. It is still a franchise, done (effectively) through a single tender. The level of DfT interference is no more and no less than usual.

TPE and SWR are not exactly "overbids" on "unrealistic promises". The promises are realistic to the specification demanded by the DfT and the assumptions laid out in the bid documents/data room. If those assumptions turn out to be wrong, then there are recourse mechanisms that may apply and a re-setting of the franchise payments may occur. That process can be quite long winded.

Increasingly, that "Change" position is complicated by factors that lie within the TOCs control as well as the factors that lie outside of the TOCs control and for which they have franchise protection. It then may become easier (and quicker) for both sides to just rip it all up and start again with either a Direct Award, a management contract or getting OLR in, the latter usually if the DfT and the TOC can't agree the finances.

In the case of SWR, the inability of NR to deliver on the promises it (at HQ level, not Route) gave the DfT in setting the specification and agreeing the timetable structure is behind quite a few of the issues. The CLE adjuster is something that both sides seem to think isn't working well (and not only on SWR either) but that is (contentiously) still a TOC risk.

The problem with bidding is that you have to reply to the exam questions as set, not deal with reality. An existing operator may know too much about the current situation but it is answering questions about the future, with the facts and assumptions that you are given, that wins you a bid.

 

[47421]

TPE and SWR are not exactly "overbids" on "unrealistic promises".

Well First have announced onerous contract provisions of £106m on TPE and £145m (£102m being First Group share), so from its shareholders' perspective they certainly do represent overbids.

The rip it up and start again option may well be the most attractive in individual cases, especially from a franchisee perspective. The problem for the DfT is that if they allow a franchisee to re-negotiate outside the original terms of the agreement then other franchisees will demand the same treatment, eg GA, but DfT wont want to re-set the GA deal until it has burnt through all its committed funding. GA, per its latest accounts, still claims that it believes GA will be profitable over its term, however unlikely that seems taking into account all the problems it has.

 

[hwl]

Yes but in practice the Central London Employment adjustment mechanism is not working as First Group (or Abellio who have the same complaint re GA) expected - apparently the CLE stats are showing employment growth at a higher rate than SWT and GA are seeing commuting numbers increase. No one knows why for sure, possibly more working from home or possibly higher proportion of new hires coming from London itself rather than SWT / GA commuterland. GA accounts say they are in dispute with DfT about how the CLE adjustment works, but no doubt DfT will say "this is what you signed up to in a very detailed, extensively negotiated 700 page plus agreement, and it is too late to say you dont like what you agreed to now".

Greater working from home is belived to be a big part.
The CLE figures also include and element of the huge growth in Uber etc. drivers and Delivery drivers who won't be using rail!

 

[packermac]

SWT especially in their last few years seemed to have a near permenant special offer on weekend travel with cheap tickets available walk up on their longer distance routes. This seemed very successful in increasing passenger numbers. However SWR haven't been doing that which I suspect has contributed to the fall in numbers.

Yes fully agree I have not seen a rail offer for any reduced tickets down here in Dorset since SWR took over.
The other things is fares seem quite high for what it is, especially now I have found it is far cheaper to change to Southern at Southampton if you are heading to London and have an extra hour for the journey.

 

[Clarence Yard]

Well First have announced onerous contract provisions of £106m on TPE and £145m (£102m being First Group share), so from its shareholders' perspective they certainly do represent overbids.

The rip it up and start again option may well be the most attractive in individual cases, especially from a franchisee perspective. The problem for the DfT is that if they allow a franchisee to re-negotiate outside the original terms of the agreement then other franchisees will demand the same treatment, eg GA, but DfT wont want to re-set the GA deal until it has burnt through all its committed funding. GA, per its latest accounts, still claims that it believes GA will be profitable over its term, however unlikely that seems taking into account all the problems it has.

Indeed and it is interesting to see the different accounting treatments that the various owning groups/government subsidiaries employ. FG now tend towards pessimistic onerous contract provisions in its accounting and any upside from DfT re-negotiations will presumably then be used to reverse some of them out. Others just say "it will be alright in the end". Of course, if you are selling bits of your organisation, onerous contract provisions up front can be "helpful".

The DfT position is somewhat compromised by the fact that NR is its subsidiary and hasn't delivered on it's promises that underpin the various franchises. Just like DfT hasn't currently got the capacity to put everything back into OLR now, it also is getting swamped with "Change" negotiations and requests. It really is a perfect storm for them as it also has the Treasury on its back.

 

[Journeyman]

It's incredibly ironic that we're about to see a possible swathe of renationalisation after Labour's worst defeat in 90 years, and the biggest Tory majority since the 80s. Can't see that going down well with a lot of the blue-rinse brigade in SWR's turf.

Stagecoach weren't particularly enthusiastic about keeping hold of SWT, as they could see the way the wind was blowing with the sort of premium payments the government wanted, and the likely problems they'd have growing the business sufficiently. They've really dodged a bullet.

 

[47421]

Yes DfT clearly are in a pickle. Sure I read somewhere that a significant portion of DfT's overall income now comes from ToC franchise premiums. It is all well and good using the Williams Review as cover for re-setting the whole franchise landscape, and clearly the current system is unsustainable as taking into account all the franchisee losses on Northern, Scotrail, Caledonian Sleepers, Northern, TPE, VTEastCoast, TPE and GA. But how is DfT going to replace all the lost income?

 

[700007]

Nobody has mentioned that passenger numbers are dropping and have been since 2016/17. Quite large percentages too - 7% in 2017 for SWT . Yes SWT. Less people are travelling for whatever reason and that blows a hole in the accounts as we’ve seen with SWR.

Bye Bye SWR it was very short lived.

SWT in 2017 would have partially been affected by the major London Waterloo closure in August where a lot of people took holiday or alternative routes such as Southern to get to the office. SWT, DfT and Network Rail were actively discouraging people from travelling in and out of London Waterloo where it was possible to do so.

 

[Journeyman]

A major issue is that there's an assumption the huge growth of the last twenty years is going to continue, but surely at some point it will level off or decline, especially as our glorious post-Brexit future is so uncertain.

 

[Bletchleyite]

A major issue is that there's an assumption the huge growth of the last twenty years is going to continue, but surely at some point it will level off or decline, especially as our glorious post-Brexit future is so uncertain.

That may be true of London commuter franchises where pretty much everyone making a given journey is going to go by train if they can pretty much regardless of anything else. But on IC and on other regional services, as the car continues to fall out of favour there is a potential for significant growth if the railway gets it right...which it presently isn't doing.

 

[Djgr]

A major issue is that there's an assumption the huge growth of the last twenty years is going to continue, but surely at some point it will level off or decline, especially as our glorious post-Brexit future is so uncertain.

And some desire to rebalance the economy through shifting jobs out of London to more cost effective locations, coupled with individuals increasingly opting out of the "not fit for purpose" London based lifestyle is not going to help.

 

[Mojo]

Surely the industrial relations issue can't have harmed the finances that much, if at all, because they would have saved a couple of million in salaries as well would have had lower costs with running fewer trains, whilst at the same time kept a lot of their income through Season tickets and the people who continued to travel?

Obviously there was also the cost of the training & allowances for contingency guards, but looking at the figures these seem broadly comparable with what I would expect operational staff would normally get for overtime, etc.

 

[47421]

That may be true of London commuter franchises where pretty much everyone making a given journey is going to go by train if they can pretty much regardless of anything else. But on IC and on other regional services, as the car continues to fall out of favour there is a potential for significant growth if the railway gets it right...which it presently isn't doing.

Well clearly some London commuter franchise bids have been made on basis of continuing rising demand. And it is a reasonable assumption that some additional demand will be created if the service improves, particularly if increased capacity means passengers get a seat where before they might not have done. Will be interesting to see what happens on Great Western as people realise the new timetable provides significant extra capacity.

One of the reasons i am so sceptical about GA is that its projections were clearly based on rising passenger numbers filling all the extra capacity offered by 10car 720s on all peak services to London coupled with a total timetable re-cast offering 1144 extra services a week from May 2020. Here we are - 720s over a year late and timetable recast off UFN. Difficult to understand how GA still believe the franchise will be profitable.

 

[pompeyfan]

Surely the industrial relations issue can't have harmed the finances that much, if at all, because they would have saved a couple of million in salaries as well would have had lower costs with running fewer trains, whilst at the same time kept a lot of their income through Season tickets and the people who continued to travel?

not quite as clear cut as that, contingency managers were getting £250 PER DAY or £350 on late/weekend duties, plus hotels and other reasonable expenses. I know DfT bankrolled First to some extent, but only lost turn up and go revenue as far as I know.

 

[Snow1964]

Now the London Assembly have made a statement

https://www.london.gov.uk/press-releases/assembly/statement-on-south-western-railway

Following the Transport Secretary’s recent statement on the poor performance and unsustainable financial status of South Western Railway, Navin Shah AM, Chair of the Transport Committee, said:

“The Transport Committee and the London Assembly as a whole, have time after time called for the devolution of suburban railway routes in London, such as South Western Railway, to Transport for London.

“South Western Railway is clearly underperforming and its financial status is not sustainable in the long term. The franchise model is clearly not working and Londoners are being short-changed when it comes to the service that is being run.

“Londoners deserve better. With the London Overground, we have seen first-hand how drastic improvements can be made to a line, when it is managed and run by TfL. We want to see the same again with other suburban rail routes across London.”

 

[infobleep]

The ORR did a review of South Western performance as recently as July 2018. See Review of Network Rail's performance delivery to South Western Railway services

I think you're in an absolutely tiny minority. Also, would you have realistically considered voting Conservative if it wasn't for that issue?

I may have done as I liked my MP otherwise. However I don't agree with leaving Europe so I may not have done for that reason but that's a whole separate discussion outside of here.

 

[infobleep]

People working from home one or two days a week.

If your outside of London and working from home a couple of days a week, a season ticket is still cheaper.

 

[Meerkat]

It's incredibly ironic that we're about to see a possible swathe of renationalisation after Labour's worst defeat in 90 years, and the biggest Tory majority since the 80s. Can't see that going down well with a lot of the blue-rinse brigade in SWR's turf.

Anecdotal but the Tory Party is a coalition of the economically liberal and the socially conservative (blue rinses) and the blue rinses aren’t that keen on privatisation (pocketed the quick profits of course though...). Plenty of silvertop Tories support renationalisation of railways and utilities.
The silvertops attitudes are also why the “Tories will privatise the NHS” is nonsense - the membership would never agree to it as they are very nostalgic about the NHS, huge users of it, and are getting massive PHI quotes....but I digress....

 

[Robertj21a]

If your outside of London and working from home a couple of days a week, a season ticket is still cheaper.

Doesn't that depend on where you are ?

 

[infobleep]

Doesn't that depend on where you are ?

Yes it does but most travel seems to be into London. At least that is how the train service is prioritised or how I see it prioritised. And I thought London seasons were cheaper after 3 days of travel.

Obviously if that isn't the case somewhere, I'm not suggesting quote it, in case it disadvantages someone using it at the price they currently pay.

 

[1725RJ]

From an outsider - how is this likely to impact staff? Driver/conductors mainly? Redundancies? Pay cuts?

 

[winks]

No changes at all relating to front line staff / drivers. The branding is Dft approved so doubt that would change either

 

[Meerkat]

No changes at all relating to front line staff / drivers. The branding is Dft approved so doubt that would change either

Apart from a possible imposition of DOO...or DCO as I think the politicians think the public will back them pushing that through

 

[WrongRoad]

RMT ballot result has been announced.

RMT members have voted to continue the strikes.

 

[HamworthyGoods]

Apart from a possible imposition of DOO...or DCO as I think the politicians think the public will back them pushing that through

Indeed following Mr Shapps’ statement yesterday about how he expects modernisation of the method of working imposition of DCO/DOO seems more and more likely regardless of the ballot result.

A large proportion of the statement was made up of the ‘modernistation’

Modernisation of the railways must come with reciprocal modernisation of the way the railway is operated. Passengers on SWR have already suffered significant disruption from industrial action by the National Union of Rail, Maritime and Transport Workers (RMT), and this week the RMTare balloting for further strikes.

These strikes are not about safety, accessibility or helping passengers. Driver controlled trains are perfectly safe, and have been operated elsewhere on the network for many years. These trains allow the guards to devote much more time to looking after passengers, which is of great benefit to those who need help with travel, like the disabled and the aged. This modernisation is essential if the future needs of this railway are to be met.

Whoever operates SWR services, I will remain committed to modernising services and improving support for passengers.