TPE Termination Payment

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VauxhallNova

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FirstGroup plc (‘FirstGroup’ or the ‘Group’) has reached agreement with the Department for Transport (‘DfT’) on the termination fee payable for the TransPennine Express (‘TPE’) train operating company. As previously indicated, a condition of the Emergency Recovery Measures Agreements (‘ERMA’) put in place by the DfT to provide continuity for rail passengers and the industry during the coronavirus pandemic was that train operators and the DfT would work to agree whether any payment is required to terminate the pre-existing franchise agreements, and if so how much, based on a pre-coronavirus trajectory financial model. The DfT and FirstGroup have now agreed the financial impact of the termination for TPE which requires a further FirstGroup contribution of c.£6m, over and above the £42.5m already paid into the operating company. The DfT has extended the TPE ERMA term until 19 September 2021, following their conclusion that no event of default would have taken place had the pandemic not occurred, although DfT and the Group are working collaboratively with a view to entering into a National Rail Contract in advance of that date

Link is below
https://otp.tools.investis.com/generic/regulatory-story.aspx?newsid=1475041&cid=858
 
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LNW-GW Joint

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Looks like First Group can now draw a line under its expensive mistakes in its TPE franchise bid and delivery, and look forward to 3 new direct awards.
The West Coast one, significantly, is for more than 10 years, while SWR and TPE are a matter of just a year or two, which suggests early rationalisation is coming.
Presumably this takes us a step nearer terminating the current franchise system - and it looks like DfT has given itself until September to reset the concession contracts.
The other franchise majors still need to settle their termination payments with the DfT.
 
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thealexweb

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...following their conclusion that no event of default would have taken place had the pandemic not occurred...

Well that’s questionable. The franchise was loss making long before COVID-19 came.
 

CAF397

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To be fair when the franshise was being drawn up, the Transpennine Upgrade was looking like it was gaining massive momentum, the fleets (which is still a puzzle to many) were all ordered to be more or less introduced around the same time, give or take a year. Passenger numbers were booming.

The fleets were the first thing to fall, being delayed. Out of the control of TPE, this impacted crew training as instead of a rolling programme of training, it seems like all 3 fleets arrived at the same time. Something had to give, and given the Mark 5s were the most unreliable, priority was given to 802s. 350s were being subleased from LNR so 397s had to be rushed in.

The pandemic has in some ways solved the rolling stock crisis. Imagine trying to run a full timetable given the reliability of 397s and Mark 5s!

Then the delays in the Transpennine Upgrade started to kick in, the finances didn't look favourable even before the pandemic. Trains that should have been 5 coaches were still 3 coaches, which means the seat revenues planned were not being seen because of the fleet delays.

I fully support that if the franchise had run as planned with no fleet delays, engineering delays or pandemic then the franchise would have met all its financial targets and been quite successful.
 

WatcherZero

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Its actually better than expected for TPE, they had set aside an £80m impairment for extra franchise termination liabilities and only £30m of that ringfenced impairment money has been required meaning £50m can now be released back onto the balance sheet.

£48.5m to exit TPE,
£33.2m to exit South Western and
Nothing to exit West Coast.
 

Obobru

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I would be very supprised if First still exists in 2 years. With ending of train franchises, the sale of its US operations and the sale of some bus operations it's a much smaller company and ripe for breaking up or being taken over.
 

mike57

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I think the rot set in for TPE at the May 2018 timetable change, that mess took 12 months to even partially sort, then new stock problems, then Covid. Any management would have been challenged by these issues. TPE management has been less than stellar, as a passenger I got the impression that the heads were well and truly buried in the sand by mid 2019. I am suprised that the DfT didnt try and strike a harder bargin, but maybe pragmatism ruled, as forcing First into financial oblivion would probably be more costly than a direct award whilst the whole franchising issues are dealt with.
 

Mollman

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I would be very supprised if First still exists in 2 years. With ending of train franchises, the sale of its US operations and the sale of some bus operations it's a much smaller company and ripe for breaking up or being taken over.
Remember just because franchises are ending doesn't mean First is no longer a rail operator. It will continue to operate the same services but under a direct award. It looks like whatever is replacing franchising will still involve competition between companies to operate it.
 

SuperNova

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I think the rot set in for TPE at the May 2018 timetable change, that mess took 12 months to even partially sort, then new stock problems, then Covid. Any management would have been challenged by these issues. TPE management has been less than stellar, as a passenger I got the impression that the heads were well and truly buried in the sand by mid 2019. I am suprised that the DfT didnt try and strike a harder bargin, but maybe pragmatism ruled, as forcing First into financial oblivion would probably be more costly than a direct award whilst the whole franchising issues are dealt with.
The issues stem from the new franchise in 2016 with those involved in the bid over promising and over-bidding. May 18 wasn't a TPE issue, but an absolute shambles led and caused by the DfT with TOC's and Network Rail playing some part in an absolute pantomime. There were some who out of their depth but the vast majority didn't bury their head in the sand at all - it's easy to blame management as a whole and I've had numerous issues, but most of them all come back to the franchise agreement and not those trying to do their jobs.
 

mike57

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The issues stem from the new franchise in 2016 with those involved in the bid over promising and over-bidding. May 18 wasn't a TPE issue, but an absolute shambles led and caused by the DfT with TOC's and Network Rail playing some part in an absolute pantomime. There were some who out of their depth but the vast majority didn't bury their head in the sand at all - it's easy to blame management as a whole and I've had numerous issues, but most of them all come back to the franchise agreement and not those trying to do their jobs.
I agree that the franchise was overbid, and it was also obvious that the DfT requirements were unrealistic. When the May 2018 timetable was released there were 'schoolboy' errors, e.g. two trains arriving at the single Malton platform within 3 minutes of each other. Common sense tells you that a train on a 100+ mile journey through Leeds and Manchester isnt going to be on time to the minute, may be only a few minutes late but enough to cause a problem. I realise these were not all TPE issues, but in any other buisiness if customer expectations are unrealistic you dont bid. Also the travelling public only sees/deals with the TOCs so when things go wrong they are the point of contact, even if the issues are coming from outside. The shame of it all is that up until May 2018 the service had been OK, not perfect but certainly good enough to use for regular trips. Post May 2018 the service was unusable, and the meltdown was self inflicted. Even just prior to covid lockdown last year journey times out of Scarborough were slower for a lot (Manchester Piccadilly and Airport for example) of destinations than pre 2018, basically a worse service.
 

SuperNova

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Even just prior to covid lockdown last year journey times out of Scarborough were slower for a lot (Manchester Piccadilly and Airport for example) of destinations than pre 2018, basically a worse service.
Having delved back through old PDF's, Man Pic to Scarborough in 2016 was 2h18. In 2020 (pre-covid) it was 2h20 with an additional call at Garforth. So journey times were definitely not slower at all, in fact the exact same with the Garforth stop adding the extra 2 mins.
 

alexl92

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I would be very supprised if First still exists in 2 years. With ending of train franchises, the sale of its US operations and the sale of some bus operations it's a much smaller company and ripe for breaking up or being taken over.
From first-hand accounts I've heard, they really don't treat their bus drivers & depot staff very well either. I wouldn't be sorry to see the back of First in many ways.
 

mike57

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Having delved back through old PDF's, Man Pic to Scarborough in 2016 was 2h18. In 2020 (pre-covid) it was 2h20 with an additional call at Garforth. So journey times were definitely not slower at all, in fact the exact same with the Garforth stop adding the extra 2 mins.
I think the 2h 20m was for the one or two direct trains to/from the Airport, during the rest of the day you were (are) faced with a 15-20 min wait at Man Vic for an onward connection that may or may not appear, or take the Tram, I did it once a week for the best part of a year up to Jan 2020, and a right pain the cross Manchester journey was. A more typical time would be 2h 45m from Pic, and a further 20 mins coming from the Airport.
 

SuperNova

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I think the 2h 20m was for the one or two direct trains to/from the Airport, during the rest of the day you were (are) faced with a 15-20 min wait at Man Vic for an onward connection that may or may not appear, or take the Tram, I did it once a week for the best part of a year up to Jan 2020, and a right pain the cross Manchester journey was. A more typical time would be 2h 45m from Pic, and a further 20 mins coming from the Airport.
That's nothing to do with the services though. That's down to the DfT rerouting trains through Manchester Victoria.
 

mike57

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Yes, its DfT, but in the case of Scarborough passengers, a lot of those crossing the peninnes, as opposed to Leeds/York commuters are making for the airport. Main Manchester station is still Piccadilly, and connections to South Manchester/Airport mainly leave from there. As a passenger rerouting though Vic, and not calling at Pic is a disaster for a lot of destinations, of which the Airport is the main one. Couple that with the service meltdown post May 2018 and passengers will find alternatives. I know TPE are only doing as they are told, but for a lot of passengers who dont understand the railway structure TPE are their first and probably only point of contact. As a regular user I noticed a distinct reduction in passenger numbers post May 2018.
 
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