How easy is it for an operator to buy new trains?

Discussion in 'UK Railway Discussion' started by Sad Sprinter, 22 Jan 2020.

  1. Sad Sprinter

    Sad Sprinter Member

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    Lets say an operator running busy London commuter lines wants to purchase more trains to cope with inner London demand. How easy is it to do so within the legal paramters franchsing and would they get any funding from London government/councils?
     
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  3. Snow1964

    Snow1964 Member

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    The franchise specifies a commitment, this is the basis of any funding, subsidy, premium payments. In recent years DfT has tended to excessively micro manage this specifying certain items rather than a generic requirement eg XX seats per train min yy wide to be fitted.

    There are some requirements that require a certain type of train to be used to a certain date, forgotten name, but it is a section number of Railways Act. Most have expired but was a way of guaranteeing usage for a leaseCo to buy trains that was common until about 5 years ago

    Nothing to stop an Operator using own funds to buy trains to be an open access operator (apart from getting the paths and access rights)
     
    Last edited: 22 Jan 2020
  4. JonathanH

    JonathanH Established Member

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    It may well be that they are already running as many trains as they can within the operational constraints of track capacity, station access and stabling facilities. In that case, all they can do is modify the interiors to create more standing capacity.
     
  5. krus_aragon

    krus_aragon Established Member

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    My understanding is that franchises are very tightly controlled these days, with no additional financial commitments (buying or leasing additional stock) allowed unless it's part of the franchise specification or negotiated separately with the DfT. The argument for this is apparently that the DfT doesn't want it or a subsequent franchisee to be on the hook for commitments made unilaterally be a previous franchise. The days of First Great Western buying a few HST rakes off their own back are long gone.

    Even the idea of a franchise running some open-access services (with stock they source themselves) is a tricky one, as demonstrated by various situations involving Arriva Trains Wales, Wrexham and Shropshire, and Chiltern Railways a decade ago. Franchise and open-access assets have to be kept separate, or some people get a bit shirrty.
     
  6. JonathanH

    JonathanH Established Member

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    Were they not bought by First Group rather than First Great Western?
     
  7. Monty

    Monty Established Member

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    I don't think there is anything stopping a TOC from purchasing additional stock with its own money or through financing with the leasing company so long as that TOC is meeting the requirements regarding rolling stock usage for the franchise. However coaches are reaching £1-2 million each, and given the government is unlikely to provide funding for things not specified in the franchise it's just not going to happen.
     
  8. krus_aragon

    krus_aragon Established Member

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    You're probably correct. (I was concentrating too much on not saying "GWR" ...)
     
  9. DarloRich

    DarloRich Veteran Member

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    I suppose nothing is stopping a TOC buy it's own stock with its own money. Except it wont happen because there is no way a TOC owning group will authorise the spend. Why would you carry the risk when others will?
     
  10. HH

    HH Established Member

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    Actually it's more simple than that. The stock will simply not pay back within the timescales of a franchise.
     
  11. DarloRich

    DarloRich Veteran Member

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    Indeed - that should be part of your business case ( that wont get authorised for all manner of reasons!)

    EDIT - I COULD make a case for extra trains of an existing type which I already owned and which otherwise would be stored. Clearly that isnt the same as buying NEW.

    An example: LNWR take more 319 units to free up 350's to make all services 8 or 12 cars.
     
  12. HH

    HH Established Member

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    Providing the network will take 12-cars and you have places to stable, clean and maintain them. And, if they're EMUs, that the electric infrastructure can deliver enough power. And that SRTs will be maintained if run by alternate running stock, or you'll have to wait for a TT re-write. And, that you have the drivers to manage the likely additional ECS.
     
  13. DarloRich

    DarloRich Veteran Member

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    Absolutely - that is all part of the art of writing the case.
     
  14. Lemmy99uk

    Lemmy99uk Member

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    Even if you manage to procure extra trains until franchise end, how are you going to clean, maintain and operate them?

    You will inevitably need extra cleaners and fitters, and possibly traincrew and revenue staff as well. There are strict limitations on the headcount for each franchise, or at least the headcount when the franchise ends.
     
  15. thenorthern

    thenorthern Established Member

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    Very rarely an operator buys stock outright (Although it does happen) normally it's bought by a leasing firm who then leases the stock to an operator. Leasing firms are normally owned by financial companies.
     
  16. O L Leigh

    O L Leigh Established Member

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    Let’s assume that all the other factors line up and LNWR buy these additional Cl319s to operate as you suggest. What happens at franchise end? Do these units still belong to Abellio? In which case what happens next? Surely the owning operator gets lumbered with a capital asset that it cannot use and the new franchisee is under no obligation to buy them off Abellio.
     
  17. Snow1964

    Snow1964 Member

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    You are correct, if next franchisee doesn’t acquire them, then previous owner would still have them. But highly likely new franchise wouldn’t have enough trains on day 1 if rejected them.

    Of course can imagine all sorts of bonkers scenarios, if Virgin had bought the 2 extra cars for the Pendolinos, outside of DfT control, they could have demanded new Operator removes them before running a service, even if they just parked them and watched overcrowded trains.
     
  18. RealTrains07

    RealTrains07 On Moderation

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    How is northern gaining extra trains so easily then? Not all of those transfers were in the franchise spec surely?:lol:

    Easier for open access to gain stock once its off lease then?

    It makes you wonder how its so complicated when companies gaining new stock is done through the ROSCOs right?
     
  19. O L Leigh

    O L Leigh Established Member

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    But presumably this wouldn't be an issue because the rolling stock requirement would be stated as part of the franchise.

    If the new franchisee was required under the terms of the franchise to maintain the same level of rolling stock as Abellio, then this would be a franchise commitment and the stock required would come from the ROSCOs in the normal manner, thereby alleviating them from the need to buy out Abellio's additional stock. Alternatively they could simply revert to whatever level of rolling stock was previously specified. Either way, Abellio gets landed with the capital asset together with it's associated ongoing maintenance costs.

    To come back to the OP's original question, where is the incentive to take this course of action? Even assuming that the operational penalties do not preclude it (platforming, maintenance and stabling, track access charges, etc), how would it benefit a TOC to buy it's own additional trains? All they are getting is additional costs that are not necessarily going to be defrayed against additional revenue.
     
  20. Stow

    Stow Member

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    The process is that the TOC develops a business case and presents this to DfT, subject to DfT approval and Treasury funding DfT can then vary the franchise to facilitate the procurement.

    Existing mechanisms exist for doing this and it has been done before, for example the Southern 5-car fleet.

    You of course need plenty of time to run in your franchise, as it will take a minimum of 2 years to run the procurement and get the trains.
     
  21. krus_aragon

    krus_aragon Established Member

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    I'm not sure off-hand what non-franchise-spec trains Northern have received (disregatding PRM dispensations for existing stock). Whatever they have gotten, I expect they will have had to run it past the DfT first.
     
  22. sprinterguy

    sprinterguy Established Member

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    All of the cascaded units that Northern have received - The ex-GWR and LM 150s, ex-Scotrail 156s and 158s and ex-Scotrail 170s, were specified in Arriva's franchise bid.

    I think they've gained a handful of 153s that are in addition to that, and the retention of the 323s vice 319s is something that been negotiated since the franchise commenced.
     
  23. DarloRich

    DarloRich Veteran Member

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    That is a standard question for anyone buying anything but especially a fleet of something. Disposal has to be part of your case. In the case of the 319 I would say scrap. They are already essentially life expired.

    CLEARLY that wouldn't hold for a brand new asset. You would then have the risk, as you say, of being lumbered with an wasted asset and no way to generate income from it.
     
  24. O L Leigh

    O L Leigh Established Member

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    Which then begs the question of "why bother?". Abellio would essentially be taking a financial hit to acquire and maintain a bunch of additional units that they are not required to provide only to take another financial hit at the end of the franchise when their open market value will have dropped. If there are suitable units currently off-lease it would surely be better to be lobbying the DfT for use of them under the normal franchising terms.

    Not sure that I agree with your assessment of the Cl319s, though. They may be currently out of use but there's plenty of life left in them, otherwise why bother cascading them north or going through the faff of fitting MGUs so that they can be run off the wires. But that's just an aside. ;)
     
  25. daikilo

    daikilo Established Member

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    Going back to the original question, and assuming it also covers financed and leased trains, the answer is that you can, provided the DfT agrees. In essence the DfT decides whether you can have a seat or even standing room. Hopefully the Williams report will cover this issue as the reality is that even if theoretically there is enough space in the trains that are authorised, the reality can be different if standees don't distribute themselves in all space avalable or significant delays occur (maybe attributed to NR) causing train cancellations or short forming.

    The only TOCs who can adapt provision to demand with some freedom are the Open Access operators (provided the additional stock meets the performance and definition specification) as witnessed by Hull Trains leasing AT300s and prior to that borrowing 2 HSTs from fellow First franchise operator GWR.
     
  26. DarloRich

    DarloRich Veteran Member

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    it must depend on whether, or not, you felt the investment could be recovered via extra passenger ticket sales coupled with those most intangible of items: an improvement in customer satisfaction and an improvement in reputation/goodwill. That said, of course, negotiating a change to the terms of the franchise would be the better bet!
     
  27. O L Leigh

    O L Leigh Established Member

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    Well that kind of is my point about the additional costs not necessarily being defrayed. Would longer trains by themselves drive sufficient additional business to pay for themselves, or do you just accommodate the existing number of passengers slightly more commodiously? My own feeling is that the demand is finite and that any growth above and beyond the level you might ordinarily expect would be small. Those other benefits that you list are great but, apart from giving a nice warm glow, do not really add pounds and pence to a TOCs turnover.
     
  28. D365

    D365 Established Member

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    Was it not the case that the DfT was rather "miffed" when First Group purchased a number of Class 43s and Class 143s?
     
  29. O L Leigh

    O L Leigh Established Member

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    And what is the status of these assets now? Have they had to be bought back again by the DfT/ROSCO?
     
  30. D365

    D365 Established Member

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    First Group still own them; the Class 43s have been retained for the GWR "Castle Class" sets, and the Class 143s are still in use. Can't remember how many of each.
     
  31. O L Leigh

    O L Leigh Established Member

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    Interesting. So we have a case study.

    I wonder what the background to this was. Were these additional assets over and above their allocation of leased stock or some way of reducing their rolling stock leasing costs by owning a certain proportion of it outright?

    I guess that First have been lucky to be the incumbent franchisee for such a very long time, so much so that they can consider such options. As has been mentioned up-thread, the financial benefits are unlikely to accrue within the normal life of a franchise.
     

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