First Group Won't Abandon UK?

Discussion in 'UK Railway Discussion' started by Japan0913, 19 May 2019.

  1. whhistle

    whhistle On Moderation

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    Which ones?
    I'd just like to remind you of this statement when they carry on, seemingly okay.


    Although I was under the impression (from someone who works for FirstBUs) that they wanted rid of their bus operations.
    I can't imagine they'd pull out of the UK transport all together?
     
  2. StaffsWCML

    StaffsWCML Member

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    Could be any. I think my favourite company will have issues at some point given the number of franchises they have, the pensions liability they signed up to and the fact that the pensions watchdog and RDG have said there needs to be significant top up to the pensions funds to plug the current deficit, but I am not allowed to comment on them because they are such an oh so perfect TOC! There is talk of them already being unhappy at the 'terms' on Greater Anglia.

    The pensions palm off is a ticking time bomb. The Williams review was commissioned for a reason. Franchising as it stands is not fit for purpose.

    This is not delivering results for passengers and it is not delivering expected profits for TOCs. It is unsustainable.

    First could pull out of transport in the UK if the risks are too high and profits too low.

    That's of course dangerously leaves us with a host of below par overseas operators who I believe are significantly underestimating the issues on the British Railways.

    Really we need to be considering a vastly different model to the current system.
     
  3. Clip

    Clip On Moderation

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    But its not most of their shareholders shouting in the press for them to do something like this though - which means they see value in the company by holding on
     
  4. Arctic Troll

    Arctic Troll Established Member

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    A hedge fund with a shorted position is going to demand the impossible and claim the failure is a financial risk. See what's happening with Thomas Cook for further details.

    Most DfT "meddling" is actually pesky things like minimum service guarantees, minimum catering guarantees, regulated fares. All stuff the tax dodgers running our TOCs would LOVE to abolish. Look at the Caribbean's favourite tax resident demanding the end of off peak fares restrictions.

    The DfT don't meddle that much, no more than the oversight any other organisation that's paying the bills would demand. It suits RDG to say they "meddle" though because the RDG want a price-gouging free-for-all.
     
  5. Arctic Troll

    Arctic Troll Established Member

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    A truly impartial source! Much of the "deficit" is down to dodgy economic assumptions. The same thing happened in my old sector with the USS pension scheme, to justify reduced dividends and increased contributions.

    And it was given no teeth for a reason.

    Franchising isn't working but not for the reasons you claim. Giving RDG a shovel to price-gouge with CERTAINLY won't fix it
     
  6. StaffsWCML

    StaffsWCML Member

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    Thomas Cook has been run by idiots for years, it was saddled with unaffordable debt to buy every competitor and reduce competition. Bad management choices.

    DfT do meddle, they buy bad trains without enough carriages. They are always meddling. The cancel required promised upgrades to lines to spend all the money on London.

    They drive away better companies from our franchises and leave us with some risk taking foreign state run companies. Hardly good for the customer, reducing service levels and competition. Its a disaster.

    The Caribbean's favourite tax resident delivers by far and away the best rail service in this country at the present time.

    I think the RDG want a decent service for all, its a decent starting point instead of some of the drivel we have to endure at present.

    The Pensions regulator have also said there is a big deficit. There is one and the DfT/Government are shirking responsibility by fobbing it off on unsustainable franchises that will fail.

    Do you think the Unions will allow staff contributions to increase without significant pay awards? I doubt it! Mass disruption, pay increases, employer contribution increases, that's some extra commitment, unfunded and unpredictable.

    Franchising is broken for many reasons, the end game is mediocre companies running garbage services, treating customers like an inconvenience to their late/dirty trains, its not great for the customer and will probably result in more cars if they carry on as they are!

    We don't know what the recommendations are yet, but if a higher price means a better service than the mediocre junk we are currently be served up I am happy to pay more.
     
  7. Arctic Troll

    Arctic Troll Established Member

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    :lol:

    Oh, you were serious?

    The DfT- with the exception of IEP- neither buy nor specify rolling stock. IEP is many things, but it is not too small.

    DfT may not agree to underwrite rolling stock they don't think is necessary, but that is not the same thing at all.

    The supposed deficit is hypothetical- based on a set of assumptions- and some of these assumptions are extremely negative about investment growth and extremely positive about life expectancy. It's not an actual deficit, just a hypothesis based on a worst case scenario.

    No, they want a decent yield for the fat cats. High fares and service cuts will abound if you take away the minimum service specifications.

    Which better companies?

    Stagecoach? Because VTEC was so brilliantly well run :lol:
     
  8. StaffsWCML

    StaffsWCML Member

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    If you don't agree then please tell me a better operator? There are...erm none. I am by no means saying they are perfect just better than the other dross.

    I think some of the 5 and 4 car sets could be too small quite quickly but only time will tell.

    So if they wont underwrite it on a 7/8 year franchise, you are expecting a TOC to buy trains for a route that may not exist when the DfT move the goal posts again...…..seriously! :lol:

    I think the assumptions are fair, life expectancy has risen and may continue to rise, it is prudent no to rely on investment growth. Who knows but final salary pension's were ditched by pretty much every other organisation and industry. Lots of companies have gone bump due to pensions over commitments. I would say its wise to expect the worst. If the worst does happen what will become of some of these TOCs?

    I just want a semi decent train service that turns up and is clean, currently franchising isn't delivering that by handing out franchises willy nilly to 3rd rate risk averse companies. I am not asking to take away minimum service specifications and I don't think I have ever seen anything to suggest that is what the RDG want either.

    VTEC failed partially because the DfT screwed up their line upgrades (Again). Stagecoach aren't perfect but I can not honestly name one provider who is fantastic! Certainly none of the current lot of tripe!
     
  9. Arctic Troll

    Arctic Troll Established Member

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    LNER to start!

    It's the little things, like getting a can of Diet Coke in 1st class on a weekend.

    LNER are, of course, run by DfT.

    They want to get rid of offpeak price protection. I wonder why that might be?

    It didn't, it failed because Beardy and the Gay-Basher got their sums wrong.
     
  10. coppercapped

    coppercapped Established Member

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    You will find that the DfT specified the Class 80X trains supplied through the IEP for the Western and the East Coast routes and the Class 700 trains for Thameslink. In neither case did it buy them - the design, development, construction and maintenance costs being carried by special companies set up by the manufacturers. In both cases the DfT arranged that the respective train operators had to use the trains as specified by the DfT.
     
  11. LNW-GW Joint

    LNW-GW Joint Veteran Member

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    The DfT, at the moment, is specifying and procuring the HS2 fleet.
    TfL specified and bought the Crossrail fleet.
     
  12. Lemmy99uk

    Lemmy99uk Member

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    No they’re not. They’re run by the operator of last resort (Arup/SNC-Lavalin/Ernst & Young).
     
  13. Bletchleyite

    Bletchleyite Veteran Member

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    Was DOR East Coast also run by them, or was that genuinely internal?

    If it was also run by them, why do we consider it nationalised?
     
  14. LNW-GW Joint

    LNW-GW Joint Veteran Member

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    The DOR individuals like Michael Holden came from consultancies like First Class Partnerships, where a lot of ex-BR talent went.
    Essentially they were contracted in individually by DfT.
    For LNER, I believe there is a formal contract with the OLR appointee firms after a bid process (well before VTEC went belly-up).
    It gets a bit murky when you realise some of the top DfT people are also from consultancies (eg Pete Wilkinson was from First Class Partnerships too).
    They are far from being deskbound "civil servants" without specialist knowledge.

    DOR had a "services agreement" with the DfT to mimic a franchise agreement but without the financial targets.
    We have no idea what the OLR contract is supposed to deliver in financial terms.
     
  15. StaffsWCML

    StaffsWCML Member

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    You can get a can on Pepsi or Pepsi Max on Virgin Trains in the lounge, free tea and coffee, water, orange juice and biscuits. As well as free sandwiches and meals during the week!

    LNER are ok, their trains are ancient though. That is finally being resolved, thankfully. I would be perfectly happy to see more operations run in the way that LNER is, but I think that is unlikely.

    I imagine they want to get rid of Off Peak price protection because some routes at some times are not in the slightest bit revenue generating. If you want decent providers to bid, you need a half decent profit margin. Not the dross we currently have on most railways. That is why we end up with some of the insufferable operators running insufferable services on local routes that are so terrible they are quite frankly utterly pointless. We are subsidising useless operators to provide useless services for about 10 people in some areas.

    It didn't it failed because they both cocked up, not one single franchise on ECML has been a success I wonder why? DfT incompetence maybe? We get the point that you got like Beardy or the Gay-Basher. But your personal dislike of them has absolutely nothing to do with the reason VTEC franchises keep failing. Of course it could be the DfT encouraging overbidding on this old line that needs upgrades to Rolling Stock and Infastructure.

    https://www.railwaygazette.com/news...rgin-trains-east-coast-franchise-failure.html

     
  16. ainsworth74

    ainsworth74 Moderator Staff Member Moderator

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    A reminder that this thread is not about which TOC you like or do not like and the reasons for that. Members will need to desist from further posts on that issue and any further posts are liable for deletion without further warning. The topic of this thread is solely related to First Group potentially exiting the UK railway sector.

    If the "fanbois" or "haters" of a particular franchise or owning group really want to get into a dust up over it then do so on a new thread.

    Thanks,
    ainsworth74
     
  17. Arctic Troll

    Arctic Troll Established Member

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    ...who work strictly on DfT orders!

    It's not about good TOC/bad TOC though. It's about the laughable idea that companies are going to "fail" due to DfT "meddling". And that a hedge fund, clearly with a shorted position, trying to bump First Group into freefall is indicative of anything.

    ECML franchises keep failing because operators keep overstretching themselves. GNER did because they were frightened of losing it, ironically to First. NatEx got caught by the credit crunch, to be fair to them. But Stagecoach simply believed their own hubris, believing DOR were inefficient and that they could price-gouge with impunity and without anyone noticing.

    The price-gouging on both Virgin-branded franchises is exactly why I don't trust the RDG. Their loyalty is totheir tax dodging owners, not passengers.
     
    Last edited: 22 May 2019
  18. StaffsWCML

    StaffsWCML Member

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    FirstGroup are in freefall because they are managed badly and struggle to return a profit on any of their UK businesses. The thought of this bunch taking over the West Coast Main Line is terrifying for what is a reliable well maintained service. The whole company is likely to fail if it keeps losing £300 million a year! How you think that a company making a loss like that is going to reduce fares and improve services is beyond me!?

    Again ECML franchises keep failing because the DfT set unrealistic benchmarks in invitations to tender, that will keep happening until they stop being incompetent fools, they need to admit we have ancient Victorian infrastructure that breaks a lot.

    If an operator offers a better service, on cleaner better more reliable trains then I say let them charge more. Maybe fix franchising so that there can be proper competition instead of useless companies having monopolies over mundane travel in certain areas.

    But don't let the facts get in the way of a bit of Virgin/Stagecoach bashing!
     
  19. Arctic Troll

    Arctic Troll Established Member

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    Half-year to Sept 18 shows operating profit of £93m and profit before tax of £42m?
     
  20. 43096

    43096 Established Member

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    But it’s not about good TOC/bad TOC, though.....!

    One further point on the ECML franchises: presumably DfT’s financial modelling is wrong as well as they let the contracts believing they were deliverable against the DfT’s own models.
     
  21. cjmillsnun

    cjmillsnun Established Member

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    This is why I won't get behind nationalisation. You won't get the old BR which was largely run by the railway management at arms length from the DoT. Since privatisation, successive transport departments (DoT, DETR, DfT) and also the SRA when that existed meddled and controlled in a micromanagement style. Franchises now are beholden to DfT in a way BR never was, and there is no way that they will go arms length now.
     
  22. whhistle

    whhistle On Moderation

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    Can you provide a link to a source backing this up?
    Not saying you're lying, just want to read a bit more about it.



    Can you give any examples (and point to these in the ITT) of "unrealistic benchmarks"?
    And is it just your opinion they're unrealistic, or quantified by some sort of organisation as being unrealistic?
    Because those bidding obviously thought they were able to meet these benchmarks.

    I'd suggest if the bidders thought Network Rail were going to do what they said on time (when have they ever done that?), more fool them.
     
  23. StaffsWCML

    StaffsWCML Member

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    I am working with the previous full year, their figures are extremely mixed, as are their levels of service. They do some things well; somethings terribly.


    The following from last year gives information on the loss, and on their subsequent management 'shake-up', they are currently a badly run company. Maybe they can turn it around but, certainly the rail franchises in the UK are very much a mixed bag, and for the trouble not extremely profitable given the risks involved, and hassle. I can absolutely understand why investors may want out of that.

    https://www.bbc.co.uk/news/business-4431268

    https://assets.publishing.service.g...oads/attachment_data/file/295084/icec-itt.pdf

    Page 98 on gives some of the financial assumptions in Invitation to tender. This is not my personal view rather this was the view shared by the House of Commons Transport Committee report:

    https://publications.parliament.uk/pa/cm201719/cmselect/cmtrans/891/891.pdf
     
  24. Arctic Troll

    Arctic Troll Established Member

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    That's a consequence of privatisation, though. If you're letting out megabucks multi-year deals, there needs to be scrutiny. And that scrutiny has to come from the DfT.

    The old BR had scrutiny when the accounts were signed off and when the settlement was paid every year. If BR did badly they lost funding in subsequent years. You can't do that with franchises, as with any subcontracting you have to have it written in the contract to begin with. And the franchise agreements are now incredibly specific because of the likes of Connex taking the p*ss with loopholes.
     
  25. Arctic Troll

    Arctic Troll Established Member

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    Perhaps the modelling is wrong, perhaps it isn't. But franchisees are free to disagree with the modelling and make other bids, or even not bid at all. The responsibility for a bad contractual decision lies with the franchisee.

    If the modelling had underestimated growth, as it had on the Abellio Northern contract, they wouldn't be handing the surplus back. Why should profit be privatised and only losses be nationalised?
     
  26. Non Multi

    Non Multi Member

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    Anyone for more managed decline?

    Anyone?
     
  27. Arctic Troll

    Arctic Troll Established Member

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    No reason why that would happen. They're spending enough on HS2!

    Point is DfT can't hand the franchisees a wedge of cash and tell them to do whatever they want.
     
  28. BeHereNow

    BeHereNow Member

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    This is absolutely right, with one caveat. It's the bidder's modelling that is used as the basis of subsidy / premium payments, not the DfT's. I don't know why so many people think DfT specify premium payments before the TOC starts; that's the point of the bidding process.

    It is worth noting the last ten years' worth of franchise bids have not really gone First's way -

    West Coast - won and then lost, having spent £10m on bid
    Great Western - given several direct awards back to back (no connection to the above, I assume)
    Thameslink, Southern and Great Northern - lost
    ScotRail - lost
    Sleeper - lost
    East Coast - lost
    Essex Thameside - Lost
    TransPennine Express - won with PCS of over £200m (compared to Virgin on East Coast at £232m) - and before May 2018 had written off losses of £106m.
    South Western - won. One or two financial issues.

    Ah well, at least they are "Confident that combining [their] expertise with disciplined bidding creates value for passengers, shareholders and the taxpayer".
    https://www.firstgroupplc.com/~/med...sentations/presentation/h118-presentation.pdf
     
  29. Arctic Troll

    Arctic Troll Established Member

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    Yep. The bidder decides how much they want to pay/how low they want the subsidy to go, not DfT. The DfT will state their assumptions on growth, etc, but any sensible bidder will decide themselves if this is a realistic assumption. The bidder will decide what they can afford to offer.

    In some cases the DfT assumptions are wrong and benefit the franchisee. The previous Northern franchise was "no growth"; people have weird and wonderful ideas about what that meant, but all it meant was DfT didn't expect passenger numbers to rise and set the minimum service guarantees accordingly. They did rise, though, and Serco/Abellio pocketed the extra profit, sticking to the contract and extracting large sums from Yorkshire Forward and TfGM to deal with the resultant overcrowding. They played the game and won.
     
  30. whhistle

    whhistle On Moderation

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    https://www.bbc.co.uk/news/business-48456840


    Interesting.
    Maybe they're only interested in FGW and the West Coast partnetship?
     

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