East Coast records profits of £182m

[142094]

Story from the back end of yesterday here

Do you think this will make the DfT have second thoughts on putting the franchise out to tender again?

 

[Aictos]

Personally the DfT would be foolish to allow the ICEC franchise to be managed in private hands when it's obviously done so well in public ownership however and this is a safe bet that the DfT will ignore all this and just allow private companies to bid for it.

 

[AlterEgo]

Much of this profit has come from cost-cutting by state hands, in an attempt to make the franchise look appealing to private interested parties, in my view.

 

[WatcherZero]

Indeed, it made a massive jump in profit because they cancelled all investment plans the previously private operator had/were implementing as well as cutting planned services.

 

[YorkshireRider]

They cut back on the Lincoln programme, moved the call centre and may yet cut back on catering crew slightly (std trolleys) but have made huge investment in the catering vechicles, and the overall maintence of the trains and are about to start a overhaul on the 91s. All the business decisions made have been good ones so far and have helped clean the complete mess that NX and Bowker left behind. I actually feared for staff and passenger safety under NX, maintence levels had fallen so low. They may say they had planned investment but were in no position to deliver it. The figures are all there in black and white now for the next companies who wish to bid for the franschise to make a sensiable bid.

 

[swt_passenger]

Story from the back end of yesterday here

Do you think this will make the DfT have second thoughts on putting the franchise out to tender again?

Not at all - refranchising is established government policy, they have recently announced the dates for it.

 

[AlterEgo]

Indeed, it made a massive jump in profit because they cancelled all investment plans the previously private operator had/were implementing as well as cutting planned services.

Not necessarily a bad thing - I am optomistic the right winner of the franchise will improve service. Perhaps we can wave bye-bye to the GNER pomp, but certainly there is room for improvement.

 

[junglejames]

The government would be daft to put this out to tender, and lets just pray they dont. That is £182m which they wouldnt have seen. However it is now sitting in the governments coffers. Im just amazed that they cannot see this, and keep putting these profitable franchises out to tender again. Crikey, even the unprofitable franchises would be cheaper for the government if they were in the governments hands.

 

[dggar]

The government would be daft to put this out to tender, and lets just pray they dont. That is £182m which they wouldnt have seen. However it is now sitting in the governments coffers. Im just amazed that they cannot see this, and keep putting these profitable franchises out to tender again. Crikey, even the unprofitable franchises would be cheaper for the government if they were in the governments hands.

That is completely against the ideology of the present government and probably any future Labour government. Why let good sense get in the way of ideology.

 

[junglejames]

That is completely against the ideology of the present government and probably any future Labour government. Why let good sense get in the way of ideology.

Very true unfortunately! The stupid thing is, they control the railways so much now, that actually they probably have more say now than they did under BR, but without the benefits.

 

[tbtc]

The government would be daft to put this out to tender, and lets just pray they dont. That is £182m which they wouldnt have seen. However it is now sitting in the governments coffers. Im just amazed that they cannot see this, and keep putting these profitable franchises out to tender again. Crikey, even the unprofitable franchises would be cheaper for the government if they were in the governments hands.

Well, no - its a question of whether a private TOC would have paid more in premiums than the £182m.

GNER and NXEA both won franchises on the basis of paying money to the Treasury in premiums.

Maybe DOR are better at running East Coast than NXEA would have been (though NXEA were obviously planning more ambitious things), but its wrong to suggest that the Government are £182m better off than if a private company were running the service.

 

[IanXC]

Well, no - its a question of whether a private TOC would have paid more in premiums than the £182m.

And whether the chance of that premium (whatever it might be) is greater than the chance of having to foot the bill for losses the franchise might make.

 

[Aictos]

So NXEA ran services not only in the Anglia region but on the East Coast Main Line to Leeds, Newcastle amd Scotland as well - wow, didn't know that

Unless you mean NXEC of course......

 

[scotsman]

Something stinks here. This is, what, a £200m change - nothing short of a miracle could pull that off. This is a blatant attempt to drum up interest in EC. Nothing more, nothing less.

I'm pretty sure I can here Brian Soutar panting in the distance...

 

[YorkshireRider]

No, of course its not a £200m change, NXEC will have made initial profit not too far away from that figure but agreed to pay all of it and some more in franchise payments to the dft, hense leaving them with minus profit. It was just a stupidly high bid by NXEC based on unrealistic targets that killed them.

 

[deltabravo]

Something stinks here. This is, what, a £200m change - nothing short of a miracle could pull that off. This is a blatant attempt to drum up interest in EC. Nothing more, nothing less.

I'm pretty sure I can here Brian Soutar panting in the distance...

Speaking of Sir Brian, I'm interested to see if Stagecoach will launch an individual bid for the East Coast franchise, or group together with Virgin.

 

[DaveNewcastle]

Much of this profit has come from cost-cutting by state hands, in an attempt to make the franchise look appealing to private interested parties, in my view.

Indeed, it made a massive jump in profit because they cancelled all investment plans the previously private operator had/were implementing as well as cutting planned services.

+1
I fully agree.

They cut back on the Lincoln programme, moved the call centre and may yet cut back on catering crew slightly (std trolleys) but have made huge investment in the catering vechicles, and the overall maintence of the trains and are about to start a overhaul on the 91s. All the business decisions made have been good ones so far and have helped clean the complete mess that NX and Bowker left behind. I actually feared for staff and passenger safety under NX, maintence levels had fallen so low. . . .

I shared your fear, perhaps more deeply than I should have done!
But I suspect that the Company differentiated the savings and investments in accounting terms which does not offset one against the other! (If I was there, then I certainly would have done so!). Cutting expenditure now, appears on the Balance Sheet in the current year as less expenditure. Spending on capital for the future appears as just a proportion of the cost which is spread over several years.
Its an accounting 'slight of hand' (EC's ability and practice in this technique is a matter I've discussed on here previously. It may still succeed in persuading an incumbent franchisee that it is a viable business - a business which is more viable on paper than in reality).