The reasons behind Virgin possibly losing the WCML franchise ?

[Pugwash]

Please pardon my ignorance as am not as well versed with the inner mechanics and political workings of the various TOC's relationships with the DfT but why is there a general consensus of opinion that Virgin will lose the WCML when the franchise comes up for renewal ? I used Virgin quite frequently when they had the Cross Country route and admittedly there could have been considerable improvements on how the service was run. However, I've had the opportunity to use the WCML more and more often in the last year to eighteen months and have found this to be a reasonably pleasant and trouble free experience. Additionally, there also seems to be good availability of cheap, long distance advanced tickets ( on certain routes) provided you book at least 5-6 weeks prior to travel. What are the underlying factors which have caused Virgin to be on the back foot during renewal time ? Is the WCML the "poisoned chalice" of the rail network ?

It is nothing about level of service or availability - the people who return the most to the DFT will win it is as simple as that. The government will bleat about value for the taxpayer, despite for the large part rail users and taxpayers being the same people. Excepting Jimmy Carr of course.

 

[Zoe]

history does factor. It shouldn't but if you have two similar bids you tend to go with the incumbent unless they have caused you problems in the past then you will try anyone new.

It has been said though that the person that makes the final decision doesn't know the identity of the bids until they select the winner. If this is the case and after evaluation they are given two similar bids then they wouldn't know who the incumbent is.

 

[scotsman]

I find it's best not to analyse the reasons behind an event occurring until the event has actually occurred...it's a rumour, nothing more.

 

[PR1Berske]

The point about SNCF made earlier is worth repeating. Monsieur Hollande is not one to spend un centime over what is necessary. If their bid is dependent on that direction of funding, they might not get it.

I don't really mind Virgin, in all honesty, although if any other company promises to deal with the stink from the toilets on some models (Voyagers, I think?), I'd bite their hand off!

 

[Masbroughlad]

Has that rather artistic person who does made up liveries done a Voyager and a Pendolino in the colours of the bidders?! Anyone point me in that direction if they haveplease?

 

[route:oxford]

In reality...

Won't any new operator simply be the same for another 15 years? It's not as if there'll be much scope for a change of stock.

Stock debranded, new menus.

As time goes by uniforms replaced and Stock repainted.

Few changes to timetabling that would have happened anyway.

 

[Masbroughlad]

In reality...

Won't any new operator simply be the same for another 15 years? It's not as if there'll be much scope for a change of stock.

Stock debranded, new menus.

As time goes by uniforms replaced and Stock repainted.

Few changes to timetabling that would have happened anyway.

Just hope whoever gets it, doesn't dumb it down as Stagecoach did with MML and Arriva have done with XC.

 

[Zoe]

Few changes to timetabling that would have happened anyway.

This time though there is simply a minimum service requirement and it's up to the bidders to propose how this should be met or if additional calls should be made. The minumum service requirement can be met by retaining the current timetable but does not have to be and the bidders can propose their own timetable.

 

[sprinterguy]

Has that rather artistic person who does made up liveries done a Voyager and a Pendolino in the colours of the bidders?! Anyone point me in that direction if they haveplease?

Owen Hodgsons' Fictitious Liveries offerings have been sadly quiet in recent times, so unfortunately there hasn't been the opportunity to see how a Pendolino would look in First Group "dynamic lines", NS yellow & blue or SNCF TGV blue and silver from his hand. However, the equally impressive photoshop skills of Paul Burkitt-Gray has produced this image of one in the Abellio yellow and blue livery : http://www.rmweb.co.uk/community/uploads/gallery/album_93/gallery_6731_93_115973.jpg

I was just pondering earlier today that a Pendolino would look pretty snazzy in SNCF TGV silver/blue: The silver-grey base colour is already there...

 

[island]

Do they accept credit cards on board now at the shop?

Most of the time. If not you can buy a shop voucher from the train manager with a card and spend it.

 

[TUC]

PUG2 was the Virgin/Railtrack contract for 140mph services on the WCML south of Crewe (a private profit-sharing deal).
PUG1 was the earlier 125mph+tilt contract between Virgin/Railtrack/OPRAF (now DfT).
The original franchise was let on the basis of a core upgrade without a speed upgrade (110mph, no tilt).

It fell apart when Railtrack discovered it had no means of delivering 140mph.
Virgin then claimed compensation and the franchise went on Management Contract for some years until the PUG1 WCRM work was complete..

One got the impression at the time that the DfT and Railtrack seemed surprised that Virgin took the attitude that a contract really was binding-which is a naievty unfortunately seen too often in the public sector.

 

[Bald Rick]

One got the impression at the time that the DfT and Railtrack seemed surprised that Virgin took the attitude that a contract really was binding-which is a naievty unfortunately seen too often in the public sector.

Two sides to every story; Virgin were simultaneously trying to overlook the small matter that their fancy new trains were more than a year late, which also affected their revnue and thus the revenue share with other parties to the contract.

 

[WCMLaddict]

Well I did tell what additional funding might be required, but I'll try to explain it again. After determining the "winning" bid the DfT performs a solvency test, which determines whether the funding proposed by the bidder is sufficient to cover the risks inherent in the bid (such as an economic downturn). This previously was used to adjust the bid. Now the bid is not adjusted but DfT can ask for additional funding. The winning bidder will have to both bear the cost of this extra funding, but also suffer the additional loss if they hand back the keys. It is not a given that they will just cough it up. Certain bidders have known cashflow problems.

On to your second point. Without the solvency test adjustment the cost of capital is not actually that large, as there is not a significant capital investment and the franchise is cash rich. It's certainly nowhere near enough to determine a winning bid. Moreover, if you think that any European Government is idly handing over large wedges of cash to its state-owned railways to bid for risky foreign ventures then you are sadly mistaken.

Thank you for explaining the process.

On the money point. I would still assume it is easier for them to get the money from their government than from commercial banks (They seem to be even more afraid of taking risks and lending). And certainly cheaper.
I'm not a banker so these are just my speculations

 

[LNW-GW Joint]

Thank you for explaining the process.

On the money point. I would still assume it is easier for them to get the money from their government than from commercial banks (They seem to be even more afraid of taking risks and lending). And certainly cheaper.
I'm not a banker so these are just my speculations

Keolis, the West Coast bidder, is actually not an SNCF-owned body.
SNCF own 44.5%, with private part-ownership by AXA and CQ of Quebec (at least according to Wikipedia).

I shouldn't think any European government will stump up cheap money at the moment. They have enough problems at home.

 

[David10]

SNCF own 56.7% of Keolis so while not a 100% owned entity, they have enough shares to control it http://www.keolis.com/en/media-cent...html?tx_ttnews[backPid]=2890&cHash=cf15cf2e29

 

[LNW-GW Joint]

SNCF own 56.7% of Keolis so while not a 100% owned entity, they have enough shares to control it http://www.keolis.com/en/media-cent...html?tx_ttnews[backPid]=2890&cHash=cf15cf2e29

Yes I see it has changed.
Nevertheless there is still significant non-state shareholding.

 

[HH]

Thank you for explaining the process.

On the money point. I would still assume it is easier for them to get the money from their government than from commercial banks (They seem to be even more afraid of taking risks and lending). And certainly cheaper.
I'm not a banker so these are just my speculations

It should be the case that subsidiaries of state-owned enterprises will have a better credit rating than other bidders, and thus find the cost of borrowing cheaper. This certainly hurts FirstGroup who are known to be short of cash. It might not give SNCF or Abellio much an edge over VT.

Based on the DfT formula for calculating bid winners I think it highly unlikely that the cost of borrowing would decide the winner on its own, however it probably would be a factor - if borrowing is costly you would need a higher margin to cover the cost of capital. But it will still mostly be about how much the bidders think they can grow revenue.