Stagecoach disqualified from three franchise competitions

[HamworthyGoods]

There seems to be doubt amongst this thread as to whether Stagecoach have actually been excluded from West Coast and Southeastern. Is there actually any cast iron evidence that they are?

The press release from Stagecoach group to the city...

https://otp.investis.com/generic/regulatory-story.aspx?cid=273&newsid=1246762

 

[hwl]

There seems to be doubt amongst this thread as to whether Stagecoach have actually been excluded from West Coast and Southeastern. Is there actually any cast iron evidence that they are?

https://uk.mobile.reuters.com/article/amp/idUKKCN1RM0N0?__twitter_impression=true

Stagecoach Group said on Wednesday it was disqualified from three UK rail franchise bids after officials informed the train and bus operator that its proposals did not meet some requirements related to pensions risk.

The company said its independent bid for East Midlands and its joint bids with Alstom for South Eastern and with Virgin Group and SNCF for West Coast have been rejected.

 

[Agent_Squash]

There seems to be doubt amongst this thread as to whether Stagecoach have actually been excluded from West Coast and Southeastern. Is there actually any cast iron evidence that they are?

Why would Stagecoach lie to shareholders in a press release?

 

[StaffsWCML]

Very good article on the risks taken by these overseas operators. Their bids are not legitimate.

https://www.standard.co.uk/business...s-are-heading-for-a-train-wreck-a4114306.html

Here’s an offer: rent my flat for three years, and take on liability for all the plumbing, electrics, windows and heating repairs until 2050. Deal?

Thought not. But this is what Chris Grayling’s transport department is asking of our rail companies.


In return for eight years of running a franchise, he now insists they take on the liability for train workers’ pensions for decades. That, on top of the already enormous risks the companies take on.


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In the past, firms have made heroic (OK, “deceitful”) promises and forecasts to win the tenders. But guaranteeing pensions liabilities in an industry with a £6 billion shortfall was too big a fib, even for them.


Stagecoach, Virgin and Arriva refused to pretend they’d comply, so Whitehall kicked them out.

That means British companies won’t be running the next generation of rail franchises. Does this matter? Well, yes. One of the points of privatisation was that private sector vim and inventiveness, spurred on by competition, would bring new ideas and provide better services for less. It was never intended that private firms would take on risks totally out of their control — pensions or the macro economy, for example.

National Express saw the writing on the wall in 2017 and pulled out of rail altogether. After today, we’re left with a phoney competition between a thimbleful of state-owned foreign bidders — the only ones capable of taking on the extra risks.

The Government should never have pressed ahead with this round of tenders in the first place. The Williams review currently ongoing promises to rip up the whole system. We should just put all tenders on hold until Williams reports. The rail franchising experiment, at least in its current form, is dead.

Also from Branson

https://www.virgin.com/richard-branson/virgin-trains-could-be-gone-uk-november

I received the news this morning that the Department for Transport (DfT) has decided to disqualify our bid for the West Coast Partnership. This means that Virgin Trains could be gone from the UK in November.

Image credit: Virgin Trains
I am devastated for the teams who have worked tirelessly to make Virgin Trains one of the best train companies in the UK, if not the world. Virgin Trains has led in the industry for more than 20 years and we wanted this to continue for many more years.

Running the railway comes with many challenges and the West Coast Main Line was struggling when we took it over, but we were determined to turn it around. With new trains, new track and our incredible team, we have become renowned for the award-winning way we look after our customers.

Virgin Trains is consistently at the top of the long distance franchised operators for customer satisfaction – receiving a 90% customer satisfaction rating in the National Rail Passenger Survey. We have almost tripled passenger journeys – from around 14m in 1997 to nearly 40m today – and introduced ground-breaking initiatives like automatic delay repay, Beam, and Alexa. Drawing on the expertise we’ve gained over the past two decades in the UK, Virgin Trains have also recently launched in the US and we are working to transform rail travel there too.

Image from Virgin Trains
We’re baffled why the DfT did not tell us that we would be disqualified or even discuss the issue – they have known about this qualification in our bid on pensions for months.

Our first priority is always to look after our teams. The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions. We can’t accept a risk we can’t manage - this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.

Image credit: Virgin Trains
We have significant concerns over the latest developments and their implications for the future of the UK rail market. We are still looking closely at the decision and we are now considering our options.

I want to thank all our teams for their hard work and dedication. It’s not easy working in the midst of uncertainty. Let’s continue to bring the Virgin magic to train travel that only we can.

 

[Bletchleyite]

Or perhaps something like 'West Coast Mainline, by Virgin Trains' in a similar way to what Arriva have done with their brands.

Yes, that seems to be allowed. And no reason why the generic brand couldn't coincidentally involve a lot of red, e.g. LNER.

 

[pt_mad]

Why would Stagecoach lie to shareholders in a press release?

Nobody suggesting they have. I merely pointed out that some posts within the first two pages seemed to be doubting this news due to the (seemingly) lack of official announcement from the DFT.

 

[brad465]

Also from Branson

https://www.virgin.com/richard-branson/virgin-trains-could-be-gone-uk-november

Branson's take has also turned up on the BBC if that's any indicator of Virgin's significance

 

[pt_mad]

Branson's take has also turned up on the BBC if that's any indicator of Virgin's significance

Why do Virgin need a partner to bid for franchises though? Is anything stopping them bidding by themselves?

 

[LNW-GW Joint]

It seems that Stagecoach and Virgin will sit out this franchise round and await the results of the Williams review.
While Branson says they are still looking at the situation, he seems to be preparing for Virgin's exit from UK rail.
Meanwhile the remaining bidders must have satisfied the DfT on pension funding, so we'll have to see if that is a millstone around those franchises.

If the industry is re-assembled into a single body as the unions would like, it seems inconceivable that pensions reform will not appear in the restructuring agenda in the future.
The privatised railway had no scope to reform the system while it was fragmented.
The railway has managed, as in other fields, to remain largely immune from reform since 1994.
Other industries/public sector bodies have not been so fortunate.

 

[StaffsWCML]

Why do Virgin need a partner to bid for franchises though? Is anything stopping them bidding by themselves?

It probably makes sense to have a strategic partner involved in transport network.

I presume now the bidding is closed no further entries can be made anyway.

The two companies left aren't entirely convincing. MTR have been hauled up on corruption in Hong Kong, not exactly a glowing endorsement! First are First, Italian railways are pretty meh.

It wouldn't be like the DfT to make a screw up though.

I would just halt the process.

 

[LNW-GW Joint]

Why do Virgin need a partner to bid for franchises though? Is anything stopping them bidding by themselves?

Virgin's style across many sectors is to offer their brand and marketing for a fee, and to leave the delivery to specialist partners.
After the 2012 WC franchise fiasco (which I think was a 50-50 bid with Stagecoach), Branson announced that they would be minority partners in future bids.
So that was why VTEC only had a 10% Virgin element. WCP had 20%, but in both cases Stagecoach was the lead bidder.
In some sectors, Virgin only take a brand commission, and don't have any management involved at all - I think Virgin Media is like that.
Virgin Atlantic, perhaps Branson's personal favourite business, is only 51% Virgin with the 49% balance owned by Delta Air Lines of the US.
Virgin America (airline - recently bought out by Alaska Airlines) and Virgin Australia were/are Virgin minority businesses because of foreign ownership rules.

 

[Robertj21a]

The reason why the previous west coast bid went the way it did was First groups fault. They would have kept the west coast if they had sorted their finances properly in the bid

They're not known for being too good with finances......

 

[StaffsWCML]

It seems that Stagecoach and Virgin will sit out this franchise round and await the results of the Williams review.
While Branson says they are still looking at the situation, he seems to be preparing for Virgin's exit from UK rail.
Meanwhile the remaining bidders must have satisfied the DfT on pension funding, so we'll have to see if that is a millstone around those franchises.

Its pure deceit or at best lack of understanding of the complexities from these foreign train operators. The only one left with any experience is First.

The government should now be performing its due dilligence to see whether these companies even have the resources to honour any of the pension commitments they have made. I highly doubt they can commit to an unknown £ figure where a 6 billion deficit exists. This should be sounding alarm bells. Any business that makes a commitment like that is on a route to insolvency.

I do not have much faith in Graylings DfT, this is the organisation that booked ferries from a company with no ferries after all. I think and hope that more comes out of this.

This system is not fit for purpose.

The only people who suffer from these incompetent companies making promises they can never sustain will be the customers with prices rises and poorer services, that isn't what the franchise model was meant to achieve.

 

[pt_mad]

And will this revelation affect any possible extension or direct award which may or may not have been given to VTWC in the meantime? I.e. are they allowed to take extensions but not future franchises? Speaking hyperthetically if the franchising process for West Coast was put on hold further as an example.

 

[hwl]

Its pure deceit or at best lack of understanding of the complexities from these foreign train operators. The only one left with any experience is First.

Govia is 70% UK Owned (Go-Ahead) that carries ~30% of passengers in the UK

 

[hwl]

And will this revelation affect any possible extension or direct award which may or may not have been given to VTWC in the meantime? I.e. are they allowed to take extensions but not future franchises? Speaking hyperthetically if the franchising process for West Coast was put on hold further as an example.

It just affects the bids they put in this time round for the 3 tenders.

 

[The Box Photter]

Why do Virgin need a partner to bid for franchises though? Is anything stopping them bidding by themselves?

Because Sir Richard and his "brand" are seen as an ethical and effective one by the general public. His skill is in maximising the value of his brand whilst allowing other companies (usually Stagecoach) to take most of the financial risk. Virgin rarely have a stake larger than 10% in any rail franchise and they're experts at jumping onto a product that they think is about to deliver success. Remember when Brawn F1 started winning races but didn't have a major sponsor and beardy made sure he got the Virgin logo plastered onto the nosecone of the cars once Jenson Button had won a couple of races? Remember Virgin Cola? Probably not, because Virgin dumped it when they realised no-one liked it and it's only selling point was that the bottle was shaped like Pamela Anderson.

Virgin wouldn't have gone anywhere near the WCML franchise if it hadn't been for the fact that UK govt was shelling out for the Pendolinos and Voyagers. It sticks in my craw when Branson goes on about how much Virgin has invested. It was mostly taxpayer's money that upgraded the WCML service, in the form of money to Railtrack/Network Rail for infrastructure and to Alsthom for the rolling stock.

That's how he can afford a private island.

 

[pt_mad]

It just affects the bids they put in this time round for the 3 tenders.

It may look slightly strange to some if this leads to the franchise process being put on hold for some length of time and the operator which runs things in the meantime is the one which was disqualified. Obviously there's no reason to think it won't be awarded on tine.

 

[hwl]

It would look slightly strange to some if this leads to the franchise process being put on hold for some length of time and the operator which runs things in the meantime is the one which was disqualified. Obviously there's no reason to think it won't be awarded on tine.

As said earlier "Disqualified" is a bad word to use "bid rejected" is better generally understood.

Hardly different to DfT specifying trains had to be blue but a bidder suggesting red trains getting rejected.

 

[RealTrains07]

Govia is 70% UK Owned (Go-Ahead) that carries ~30% of passengers in the UK

70% not 100% like first and stagecoach

 

[hwl]

70% not 100% like first and stagecoach

have a look a foreign holdings of shares in those 2 especially First, they aren't 100%

 

[RealTrains07]

As said earlier "Disqualified" is a bad word to use "bid rejected" is better generally understood.

Hardly different to DfT specifying trains had to be blue but a bidder suggesting red trains getting rejected.

Is this specified in the EM franchise or SE? Cause it would make sense for abellio to have blue trains on East Midlands since they already run companies with orange, green and red trains

 

[RealTrains07]

have a look a foreign holdings of shares in those 2 especially First, they aren't 100%

Still not European run though

 

[hwl]

Still not European run though

Neither is Govia (Newcastle)

 

[RealTrains07]

Abellio now owns all trains based in the midlands then.
Regarding stagecoach losses with virgin, surely virgin could just partner up with SNCF and kick stagecoach out the bid??

 

[pt_mad]

Wonder whether a briefing has gone out to staff yet?

 

[RealTrains07]

But are the things they are being asked to comply with reasonable?

To commit to topping up a pension fund that no one has any idea how much the figure will be seems a bit ridiculous for any business to commit to. The other businesses may be compliant to a broken franchising system, but will they actually be able to meet their obligations or will they have to pull out when the going gets tough.

Stagecoach has the benefit of hindsight does MTR/Guangshen Railway Co have it? Really not sure how Abellio can be given more franchises when its Scot Rail services are absolutely appallingly bad.

Two of the best performing UK rail companies for customers, have been removed from the network based on pie in the sky government franchise models, that quite frankly don't work.

I would put money on some of these companies going to the wall like Carillion/Interserve by complying to this nonsense.

The franchising system makes no sense.

As long as you say you can comply with something on a document you can get the deal, but your service can be awful and expensive. Those with proven track records of garbage service should also be excluded from bidding. Abellio, Govia etc should not be allowed anymore till they sort out their current crock.

Abellio owns 5 companies now. No way can they try bid for anymore surely??

Arriva should be up there too with their performance on Northern and the lack of improvements on Cross Country.

Mabye stagecoach can bid for cross country instead??

 

[LNW-GW Joint]

Abellio now owns all trains based in the midlands then.
Regarding stagecoach losses with virgin, surely virgin could just partner up with SNCF and kick stagecoach out the bid??

Bidding for WCP closed many months ago.
DfT will not reopen the bidding (unless they find reasons not to make an award to one of First or MTR).

As incumbent on the WCML, and major brand owner, Virgin has a value to the remaining bidders.
But I can't see either First or MTR dumping their existing partners to make room for them.
SNCF are probably exceedingly miffed to be excluded as well, having picked the wrong partners.
It means that Trenitalia is left as the European high speed operator having a major influence on HS2 operation.

 

[Aictos]

Abellio now owns all trains based in the midlands then.

Not really as Cross Country last time I checked served routes in the Midlands ie Birmingham to Leicester and Nottingham so Abellio haven't gone ahead and owned all the trains/routes in the Midlands.

As to Stagecoach, maybe they might follow National Express and just concentrate on Non UK operations?

 

[RealTrains07]

Bidding for WCP closed many months ago.
DfT will not reopen the bidding (unless they find reasons not to make an award to one of First or MTR).

As incumbent on the WCML, and major brand owner, Virgin has a value to the remaining bidders.
But I can't see either First or MTR dumping their existing partners to make room for them.
SNCF are probably exceedingly miffed to be excluded as well, having picked the wrong partners.
It means that Trenitalia is left as the European high speed operator having a major influence on HS2 operation.

The franchise system is a joke, too many loop holes and issues that need fixing

For all we know the government could have changed the contract last minute