How much are rail companies losing to delay repay with the current disruptions?

[Clarence Yard]

To be fair to GWR, they do manage the TARA element of the IEP contract so they should be rewarded for that task.

 

[PG]

To be fair to GWR, they do manage the TARA element of the IEP contract so they should be rewarded for that task.

Presumably an acronym for
Threat
And
Risk
Assessment

?...

 

[43066]

it's worth pointing out Avanti's current timetable is pretty much what BR ran *as a standard timetable* in 1982 - and tgat was without Industrial Action....

The problem is the unions think that because the taxpayer is footing the bill they can just hold the TOCs to ransom.

Avanti’s current timetable also isn’t down to industrial action. This is just your usual Dail Mail esque attempt to blame everything on the unions…

 

[Bald Rick]

whats going to change or do you expect drivers to be more interested in overtime when the warm weathers gone

More driver training done, so more drivers with a ‘fuller’ route card. Also less annual leave being taken.

Avanti’s current timetable also isn’t down to industrial action. This is just your usual Dail Mail esque attempt to blame everything on the unions…

Whilst this is officially true, it is also the timetable that would be operated if there was industrial action in the form of a Rest Day Working ban.

 

[Goldfish62]

The money seems to exist sufficiently to pour into the pockets of (e.g.) First Group shareholders.

Funny that. Many FirstGroup shareholders are staff who have been on strike. I'm sure they'd be interested to know that money has been pouring into their pockets.

 

[A0]

Avanti’s current timetable also isn’t down to industrial action. This is just your usual Dail Mail esque attempt to blame everything on the unions…

Not the Daily Mail, but The Guardian as it happens:

Labour demands action over Avanti West Coast reduced train service

Transport secretary urged to press for restoration of full timetable or strip operator of contract after 12 cancellations on Monday

www.theguardian.com

"The slimmed-down timetable was supposed to prevent sudden cancellations, something Avanti blamed on a “current industrial relations climate” involving higher sickness absence and “unofficial strike action by Aslef members”."

 

[43066]

Whilst this is officially true, it is also the timetable that would be operated if there was industrial action in the form of a Rest Day Working ban.

But in absence of such a ban it’s simply the timetable that’s being operated due to not having enough staff and over reliance on volunteers. That’s entirely down to Avanti.

I note even Avanti seem to have retreated from the “unofficial industrial action” wording they used previously (and still haven’t produced evidence of!)

 

[Clarence Yard]

Not entirely, as their budget for both recruitment and training is now controlled by the DfT and has been since March 2020.

Whether they have acted as a “good and efficient” operator in respect of training will be reflected in the relevant performance component of their management fee.

 

[43066]

Not entirely, as their budget for both recruitment and training is now controlled by the DfT and has been since March 2020.

Whether they have acted as a “good and efficient” operator in respect of training will be reflected in the relevant performance component of their management fee.

Yes but unless the DfT have instructed them to increase complement and allowed them the funds to do so they’ve just rubber stamped the previous longstanding arrangement.

 

[RT4038]

The TOCs were commercial enterprises who were best placed to deal with outdated working practices yet the accountants clearly saw that the current arrangements worked well and were financially very good for the operator so nothing changed. The franchises should have been left as they were as they would have made the right judgement call over what to pay the staff vs the revenue risk.

No they weren't. They won the franchise on the basis of the existing working practices, and therefore had no incentive to amend these practices as any losses incurred from industrial action would never have been made up by the savings in the life of the franchise. It has always been the Government on the hook for the total costs of the Franchises and for a period they looked the other way. Now they want to reduce the costs of manning. (apart from the Southern/Thameslink dispute which was while GTR was in a management contract (similar to the 'franchises' now) and the Government bankrolling the losses)

 

[43066]

No they weren't. They won the franchise on the basis of the existing working practices, and therefore had no incentive to amend these practices as any losses incurred from industrial action would never have been made up by the savings in the life of the franchise. It has always been the Government on the hook for the total costs of the Franchises and for a period they looked the other way. Now they want to reduce the costs of manning. (apart from the Southern/Thameslink dispute which was while GTR was in a management contract (similar to the 'franchises' now) and the Government bankrolling the losses)

As someone who actually works on the railway as a driver (not for Avanti), I’m curious to hear your no doubt expert and well informed opinion on which of my working practices are so outdated?

 

[Bald Rick]

Yes but unless the DfT have instructed them to increase complement and allowed them the funds to do so they’ve just rubber stamped the previous longstanding arrangement.

Part of the original franchise included increasing the establishment, in order to run the extra services. My guess is that Covid timing put a big spanner in those works.

 

[RT4038]

As someone who actually works on the railway as a driver (not for Avanti), I’m curious to hear your no doubt expert and well informed opinion on which of my working practices are so outdated?

I am unsure what my opinion of which working practices are outdated has to do with the point I made?

However, as you ask (and I have no idea whether this applies to you personally or not), Sundays outside of the working week would be a good place to start.

 

[JamieL]

Funny that. Many FirstGroup shareholders are staff who have been on strike. I'm sure they'd be interested to know that money has been pouring into their pockets.

Not sure what you are suggesting...First Group have been paying their twice yearly dividend payment. Are the shareholding staff getting a reduced dividend or similar?

 

[Halwynd]

When there is little or no risk for a TOC, the percentage profit margin is far less relevant than Return On Capital Employed (ROCE). Put simply, ROCE is the amount of money you receive as a percentage of your total investment. The 2022 profit margin for First Group's rail division is indeed around 2%, but ROCE is 14%.

Now, if someone told me that I could invest my money in a business that carries no risk, can get away with operating whatever service it chooses, however dreadful - and, every day, decide that service level with relatively little notice - a business that could treat its customers with disdain, and that I would receive a 14% return on my investment as a result, my next words might well be: where do I sign?

The TOCs are operating in a new world now. Forget profit margins and look at their ROCE over the next few years.

 

[Tetchytyke]

When there is little or no risk for a TOC, the percentage profit margin is less relevant than Return On Capital Employed (ROCE). Put simply, ROCE is the amount of money you receive as a percentage of your total investment. The 2022 profit margin for First Group's rail division is indeed around 2%, but ROCE is 14%.

This.

It's also worth pointing out that striking staff don't get paid, so the saving from that is going to more than cover refunds/delay repay.

 

[Goldfish62]

Not sure what you are suggesting...First Group have been paying their twice yearly dividend payment. Are the shareholding staff getting a reduced dividend or similar?

I'm suggesting that "money pouring into shareholders pockets" is a gross exaggeration, with the somewhat lazy implication that all shareholders are greedy rich ultra-capitalists who are are demanding excessive dividends.

Plenty of those shareholders have been standing on picket lines.

Incidentally, until recently FirstGroup hadn't paid any dividends for years.

 

[swt_passenger]

Presumably an acronym for
Threat
And
Risk
Assessment

?...

TARA is Train Availability and Reliability Agreement.
There’s also a Master Availability and Reliability Agreement. (Whatever the difference is I’ve no idea.)

 

[Watershed]

When there is little or no risk for a TOC, the percentage profit margin is far less relevant than Return On Capital Employed (ROCE). Put simply, ROCE is the amount of money you receive as a percentage of your total investment. The 2022 profit margin for First Group's rail division is indeed around 2%, but ROCE is 14%.

Now, if someone told me that I could invest my money in a business that carries no risk, can get away with operating whatever service it chooses, however dreadful - and, every day, decide that service level with relatively little notice - a business that could treat its customers with disdain, and that I would receive a 14% return on my investment as a result, my next words might well be: where do I sign?

The TOCs are operating in a new world now. Forget profit margins and look at their ROCE over the next few years.

The ROCE is probably better than it was in the franchised days. It basically explains why the OGs were prepared to accept 'small change' (in the grand scheme of things) in terms of management and performance fees for the NRCs.

That being said, the suggestion that the operators will still get all of their fees even if they deliver a poor service is simply not correct. Anything that is attributable to the operator will cause the performance fee to reduce, as will even some things that are outside of their control.

The poor level of service and timetable cutbacks on some of the franchises can be pinned almost entirely on DfT direction as to payrises and industrial relations. So naturally, the DfT cannot go penalising operators for the inherent consequences of their funding decisions.

 

[43066]

Not the Daily Mail, but The Guardian as it happens:

Labour demands action over Avanti West Coast reduced train service

Transport secretary urged to press for restoration of full timetable or strip operator of contract after 12 cancellations on Monday

www.theguardian.com

"The slimmed-down timetable was supposed to prevent sudden cancellations, something Avanti blamed on a “current industrial relations climate” involving higher sickness absence and “unofficial strike action by Aslef members”."

The Guardian reported what the company had said (note the quotation marks). You parroted the company line as if it were uncontested fact and added the usual tired, boring dig about unions holding the country to ransom…

Can you see the difference?

 

[6Gman]

The money seems to exist sufficiently to pour into the pockets of (e.g.) First Group shareholders.

The money seems to exist sufficiently to pour into the pockets of (e.g.) First Group shareholders.

This year's dividend was 1.1p per share, a 1% return on the current share price.

And was the first dividend paid in - I understand - nine years.

Pouring?

 

[Nicholas Lewis]

To be fair to GWR, they do manage the TARA element of the IEP contract so they should be rewarded for that task.

Yup thats fair enough i was subtracting the lease costs from overall costs as they are technically pass through to show that margin on GWR controllable costs but shows even with full performance fee its less than 3%

 

[JamieL]

I'm suggesting that "money pouring into shareholders pockets" is a gross exaggeration, with the somewhat lazy implication that all shareholders are greedy rich ultra-capitalists who are are demanding excessive dividends.

Plenty of those shareholders have been standing on picket lines.

Incidentally, until recently FirstGroup hadn't paid any dividends for years.

The vast majority of First shareholders aren't standing on picket lines. The accounts are clear, First is projecting a regular dividend payment to its shareholders going forward and income from UK rail is an important part of that. The concept is already covered in posts above.

 

[Tetchytyke]

Plenty of those shareholders have been standing on picket lines

First Group's biggest shareholders, owning c.50% combined, are:
Shroder Investment Management
Threadneedle Asset Management
Aberforth Partners LLP
Liontrust Portfolio Management
West Face Capital

I don't think they will be out on the picket line toasting marshmallows on the brazier.

As for dividends, they are just one way of returning value to shareholders.

 

[Clarence Yard]

The vast majority of First shareholders aren't standing on picket lines. The accounts are clear, First is projecting a regular dividend payment to its shareholders going forward and income from UK rail is an important part of that. The concept is already covered in posts above.

I found the thought of some of First Groups city investors standing on a picket line rather amusing!

The private sector doesn’t run rail companies for charity. There has to be a return on their time and money and their investors will be looking for those dividends as well as an increase in the share price.

Taking GWR, TPE and their share of SWR, their annual combined base fees are about £12.5m. But the extra amount that could be earned in performance fees is about £33m. Of course they won’t earn that much but it shows you what incentive there is for the private sector companies to perform.

 

[Snow1964]

Taking GWR, TPE and their share of SWR, their annual combined base fees are about £12.5m. But the extra amount that could be earned in performance fees is about £33m. Of course they won’t earn that much but it shows you what incentive there is for the private sector companies to perform.

Without going off topic, at the moment not getting much of the potential £33m performance fees.

But in a way it is available free money for the taking, however the unions have never been interested in doing a deal to agree a percentage split (with rest for shareholders) then getting on with focussed aim of helping to get the performance earned so their members can benefit from it as bonuses.

 

[Nicholas Lewis]

DfT have published how operators paid out on delay repay last year and previous years ( stat released by DfT ) with LNER by far and away the highest at £11.2m, AWC was 2nd highest at 8.4m with GWR third at 6.3m. I know ECML has its issues but so does every operator but guess they are more helpful in giving refunds although its very clear its the Inter City Operators that pay out far more not the commuter centric operators