After months of speculation, Transport Secretary Chris Grayling MP made his announcement on the East Coast rail franchise yesterday (May 16th).
Journalists were expecting an announcement on Tuesday, but it came on the afternoon of May 16thin a statement to the House of Commons.
The Virgin Trains’ East Coast franchise, whose shareholders are Stagecoach Group (90%) and Virgin Rail (10%) are being stripped of the franchise that they took over in 2015.
The Transport Secretary has opted to put in an Operator of Last Resort (OLR). Publicly-owned London North Eastern Railway will take over operating the route on June 24th 2018.
It would appear that the (OLR) option has been a serious consideration for Grayling since February 14ththis year when Government-owned company DfT OLR1 Limited was renamed to London North Eastern Railway Limited.
Since privatisation of the route in 1996 staff have worked for Great North Eastern Railway, National Express, Directly Operated Railways and currently Virgin Trains East Coast. They will transfer over to LNER under TUPE regulations.
Virgin Trains East Coast has been using its own financial reserves to meet its franchise obligations following a shortfall in revenues. There is no suggestion that the route is failing or that Stagecoach Group and Virgin Rail have failed to meet the terms of the franchise.
Chris Grayling told the House of Commons that following his statement in February 2018 that “the franchise would run out of money within months”. He added “This is not because the route is failing. It continues and will continue to generate substantial returns for the government, and the most recent figures show passenger satisfaction at 92%. The route has its challenges, but it is not a failing railway.
“However, as I explained in February, Stagecoach and Virgin Trains got their bid wrong and they are now paying a price. They will have lost nearly £200 million meeting their contracted commitments.
Grayling said that the analysis carried out by his team suggested the case for the future of the East Coast route was very finely balanced, with some elements favouring a contract with Virgin Trains and others favouring the Operator of Last Resort. He concluded “When judging against my key principles, neither option was obviously superior”.
“There is, though, another factor that I have taken into account. I want to make the smoothest possible transition to the creation of the new East Coast Partnership. So given the finely balanced judgement, I have taken into account broader considerations and decided to use the current difficulties to drive our long-term plans for the East Coast Partnership.” The Partnership approach will align the operation of trains and management of infrastructure.This is the second time the East Coast rail route has been taken into Government control. The last time was following the failure of National Express management on the route.
Stagecoach Group Chief Executive, Martin Griffiths, said: "We are surprised and disappointed that the Department for Transport has chosen not to proceed with our proposals. We believe our plans offered a positive, value-for-money way forward for passengers, taxpayers and local communities, ensuring the continuation of the exciting transformation already underway on East Coast and a smooth transition to the Government's new East Coast Partnership.
"However, we respect the Government's decision. We will work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements, supporting our employees and maintaining the same clear focus on our customers as we have over the past three years.
"Today's decision should not detract from the hard work and dedication of our people at Virgin Trains East Coast, who have been central to the transformation we have been delivering for our customers over the past three years. During that time, we have attracted more passengers, greatly increased investment, achieved industry leading customer satisfaction and made significant payments to the taxpayer to reinvest in public services.
"Despite today's news, we believe that we can continue to make a positive contribution to the UK rail market, delivering long-term customer benefits and sustainable returns for taxpayers and investors."
There is a key question, however, that still needs be asked. If Stagecoach/Virgin got it’s sums wrong and over-bid, why was it not picked up at the bidding stage by the DfT? That said I am aware that the East Coast rail franchise is seen as a jewel of rail operations and maybe, just maybe, there has been a case of train operators wanting East Coast within their portfolio ‘at any cost’!
Stagecoach in Chesterfield, part of Stagecoach Yorkshire, will be taking over operation of the local bus services in Matlock from Tuesday 29th May 2018. The services will be marketed under the under the Matlockbus name.
Optare Solo 47325 is being refurbished for use on the route sand has gained Matlockbus branding on its standard Stagecoach livery. We understand that the vehicle will also gain a cherished registration mark.
We are pleased to bring you a selection of images of the vehicle showing the new Matlockbus branding courtesy of Stagecoach in Chesterfield and Shayne Howarth.
On Saturday 26th May, between 10:00 and 16:00, Stagecoach Cumbria &n North Lancashire is opening the doors to its’ West Cumbria (Lillyhall) bus depot for an exclusive look behind the scenes!
Regular shuttle buses will be operating from both Workington Bus Station and Whitehaven Town Centre to thel depot using a mix of heritage and modern buses.
On display will be a large number of vintage vehicles, including many built just over the road at the Leyland factory in the 1970s and 1980s. As well as vintage buses there will also have some of the most modern vehicles available, including one of the 'Lake Sider' Open Top vehicles that is used in the Lake District.
Refreshments will be available and there will be a number of transport related stalls.
You will be able to take a ride through our bus wash in a double decker bus (Stagecoach promises not to use an Open Topper!). You can also have your name in lights on the destination display on the front of one of the buses.
Lillyhall Industrial Estate
Parking is not available at the depot, so please use one of the shuttle services from Workington or Whitehaven or alternatively the Stagecoach Gold 300 or 302 services which will stop and pick up outside the depot.
Stagecoach adds that if anyone would like to attend with a vehicle or a trade stall then they should send an email to email@example.com
The event is free to attend.
Vehicles expected to attend (subject to availability) are:
FAS982 Albion Victor LT Jersey Motor Transport Spencer Graham Coaches
FYD864T AEC Reliance - Plaxton Supreme Red & White McCalls Coaches of Lockerbie
H132GVM Dennis Dominator - Northern Counties Magic Bus Preserved
tbc Dennis Trident - ALX400 Open Top Newcastle Citysightseeing Stagecoach North East
tbc Alexander Dennis - Enviro 200 MMC Stagecoach Stagecoach Manchester550 Group
PHH149W Bristol VR Cumberland Brian Pritchard/John Burrow
P545PNE Mercedes-Benz - Plaxton Beaver 2 Osprey Bus Preserved
X805SRM MAN 18.220 - Alexander ALX300 White Workington Transport Heritage Trust
CEO956 Leyland PD2 - Park Royal Barrow Corporation Preserved
G186JHG Leyland Olympian - Alexander Stagecoach Stripes Preserved
TRN481V Leyland Atlanteen - ECW Ribble Preserved
CHH210T Leyland National MK1 CMS Poppy Red Workington Transport Heritage Trust
WHH556S Leyland National MK1 REV 01 Workington Transport Heritage Trust
GRM353L Leyland National MK1 NBC Cumberland Workington Transport Heritage Trust
SHH389X Leyland National MK2 Western Scottish Preserved
CEO720W Leyland National MK2 Barrow Corporation Workington Transport Heritage Trust
TSJ64S Leyland Leopard - Alexander Y Type Western Scottish Preserved
DAZ3294 Leyland Tiger - Plaxton National Express Preserved
PIJ5170 Leyland Tiger - Duple Caribbean Robinsons of GT Harwood Preserved
54076 Volvo B12B - Plaxton Panther Stagecoach Stagecoach MSL
tbc Volvo B5 - Wright Gemini Open Top Lake Sider 599 Stagecoach CNL
FTV10L Volvo B58 - Duple Dominant Border Bus Preserved
RIG7105 Volvo B10BLE - Wright Renown Ellenvale Coaches Ellenvale Coaches
IIW828 Volvo B10M - Jonckheere Deauville Ellenvale Coaches Ellenvale Coaches
L948CRU Volvo B10M - Plaxton Premiere Primrose - Black/White Workington Transport Heritage Trust
N814DNE Volvo B10M - Alexander PS Express Motors Ian McKnight
L948CRU Volvo B10M - Plaxton Premiere Primrose - Black/White Workington Transport Heritage Trust
K779DAO Volvo B10M - Alexander PS Yellow & Green Workington Transport Heritage Trust
tbc Volvo B10M - Alexander PS School Runner Stagecoach CNL
R983XVM Volvo B10M - Alexander PS Training Stagecoach CNL
E50TYG Leyland Royal Tiger RIDINGS TRAVEL Preserved
Stagecoach East's open top Bristol FLF/ECW double deck 19952 (JKAH552D) was given an outing into Norfolk on Monday April 23rd when it was used by the company's marketing/publicity unit to enable the removal of timetable cases from a number of bus stops. With Stagecoach exiting most of its services in Norfolk after April 28th, the timetable cases were being removed.
The use of the bus, from the Stagecoach UK Bus Heritage Fleet , followed its recent successful MOT ensuring that it remains operational for a further 12 months although there are few opportunities now to use it on normal service as had been the case during the late 1990s and early 2000s.
Steven Knight Media was there to capture images of the bus on April 23rd and we are pleased to present a selection here.
Are there more road works taking place on our already congested roads these days? I only ask because delays to scheduled bus services in various parts of the country are in the increase.
Current Health and Safety regulations mean that lane closures before and after the actual works area have seemingly increased in recent years. I am not questioning the safety of workers but on already congested town and city roads it puts greater pressure on the available roadspace.
I think that most bus passengers accept that the volumes of traffic and the effects of road works will result in a couple of minutes delay to some of their journeys. But what happens when those delays get longer. Well, personal observations are that short hop passengers desert the bus, and others may get off one or two stops earlier than they need to as they can walk faster than the bus is travelling.
In SKM’s local area Stagecoach in Peterborough is about to revise all of its local timetables. On a number of routes this allows for additional running time at peak times. But what it does do is create a longer gap in the frequency when the additional journey time is introduced and a shorter gap when services return to the normal journey time. The effect is the loss of a consistent every 10 minutes or every 20 minutes frequency. But how else can the effects of road congestion be mitigated.
Extra resources, vehicles and drivers, are not a realistic option. They would only be required for a short time every day and would heavily load the route’s operating costs. The alternatives are to do as Stagecoach is doing in Peterborough or reduce frequencies - making ten minute frequencies every 12 or even 15 minutes for example. That creates its own problems and will potentially lead to overcrowding.
Normal traffic delays do inevitably result in bunching on high frequency routes. There also seems to be a reluctance of drivers to overtake a late running bus in front of them as it loads at a bus stop. In my time with a PTE in the 1970s and 80s skip stopping was frequent as bus crews would help out the late running service in front. Now in many parts of the country it is the exception rather than the rule. Buses (and I have seem more than one on several occasions) will wait behind the one that is loading. I appreciate that there may be issues where the leading bus has a fully buggy and wheelchair bay but following buses could easily pause to see if their accommodation is needed before overtaking the bus which is stationary and loading.
But back to Peterborough and in the last few weeks road works on several city centre roads, and parkways has caused delays of massive proportions. Buses have been taking upwards of 20 minutes to travel distance that would normally be done in under five minutes. Add in a wet day and more traffic on the roads and that 20 minutes delay becomes greater. Passengers become frustrated as do drivers and Controllers have their work cut out regulating services. There is no doubt that mileage is also being lost.
Will it get any better? My personal view is no and the challenges that bus operators face will just increase.
We receive dozens of press releases and statements from bus, coach and rail companies every week and in the main we are expecting them. Occasionally a press statement arrives which was takes us by surprise and that was the case yesterday.
The announcement from Stagecoach Group was that Stagecoach South East Managing Director Philip Norwell will leave the business next week after clocking up some 43 years’ service in the bus industry.
Now Philip has been extremely supportive of our activities and we dealt with him extensively during his time with the original Stagecoach East (when Peterborough and Cambridge were managed from Northampton along with the former United Counties empire) and the later Stagecoach East incarnation which covered Peterborough, Cambridge and Bedford.
Philip began his career at the National Bus Company subsidiary Eastern Counties in Peterborough in 1974, and worked for a number of years as a driver and worker director until the company was taken over by Stagecoach.
Philip was always forward looking and his creativity saw many new services launched. He also masterminded the introduction of the Cambridge Citi and Peterborough Citi networks.
He became Marketing Officer for Stagecoach Cambridge in 1997 before becoming Commercial Director in 2002.
Philip was always forward looking and his creativity saw many new services launched. He also masterminded the introduction of the Cambridge Citi and Peterborough Citi networks.
Philip was a huge supporter of heritage operations and took the two Bristol FLFs at Stagecoach East under his wing ensuring that they were used on a regular basis. I have conducted both the open top and closed top FLFs in service on numerous occasions with Philip driving whilst also assisting him and other Stagecoach staff at the Silverstone (British Grand Prix) Park & Ride operation.
He also promoted the case for the repainting of the Leyland Olympian Megadekka into original Stagecoach stripes livery, a move that gain the approval of Stagecoach founder Sir Brian Souter.
I also had the pleasure to work with Philip over the last fifteen years or so in a professional capacity whilst at Virgin Trains when the Luton Airport-Milton Keynes rail link formed part of the West Coast rail franchise agreement. But as a journalist there were also occasions when some difficult questions were posed.
Philip was appointed Managing Director of Stagecoach South East in 2013 and oversaw the transformation of the business gaining Group investment in new vehicles to replace a significant number of non-DDA step floor saloons and double deck vehicles. He even took several Dart SLFs into the South East fleet from Peterborough where in 2004 he had overseen their introduction when new onto the Peterborough Citi network.
He also has a number of heritage vehicles to keep him occupied and even arranged the repainting of the last Mercedes 709D minibus in the fleet into its original Stagecoach stripes livery.
Stagecoach UK Bus Managing Director for England and Wales, Mark Threapleton, said: “I would like to thank Philip for the sterling work he has done over many years to deliver improvements for bus passengers across the east and south east of England in particular.
“He has made a valuable contribution to the business and we wish him well in the future.”
Philip Norwell added: “I have reached a milestone in both age and achievements and have decided it is time to move on. I have worked with some fantastic people over the years and it has been a real privilege to have been involved in some of the innovative projects we have delivered together and the many improvements we have made for customers. I wish the team in the south east every success going forward.”
And I personally and through SKM wish Philip all the best for the future.
A recruitment process for the position of Managing Director, Stagecoach South East is underway. Until an appointment is made, the South East business is being managed on an interim basis by Mike Watson, Regional Director - England & Wales.
Getting on a course to be a train driver has for many years been difficult for anyone not already in the rail industry. It has also been the case that some train companies would only take applications from people who were already driving trains on the national rail network.
So we were encouraged to hear from Virgin Trains - the bit of the business running trains on the West Coast - last week. The company has a train driver apprenticeship scheme and has vacancies. It is looking to fill three positions, which will be based at Glasgow, Wolverhampton and London Euston.
No other train company is offering a train driver apprenticeship scheme.
Virgin has pioneered the year-long course in partnership with train drivers union ASLEF.
A Virgin Trains spokesman told us: “With many of our train drivers nearing retirement eligibility age, we on the lookout for fresh talent. We are hoping that the scheme will attract a diverse group of people including those who had previously not considered a career in rail”.
During the programme, apprentices receive training in all aspects of the train driver role as well as additional learning based on functional skills and English, Maths and ICT. They shadow drivers, train managers and station staff so they can gain a full appreciation of how the driver's role fits within wider operations. Apprentices also benefit from experiencing other areas of the company including control and command, safety and fleet management and even spend time with other Virgin companies, including Virgin Atlantic.
Head of drivers for Virgin Trains, Nick Chadwick, told us: “As someone who joined the rail industry to become a driver as an ambitious 19-year-old, I am keen to give the next generation the same opportunity. We're delighted that all three of the apprentices from the pilot have gone on to join our driver trainee scheme. We're looking forward to seeing the next three fortunate candidates come through the doors."
Samantha Jones, 24, train driver apprentice graduate said of the scheme: "This apprenticeship has given me a chance to see what it's like to be a driver. I can't wait to start my official traineeship and eventually be responsible for getting thousands of customers to their destination every day. I hope the scheme will encourage more women to consider a career as a train driver - it's been such a rewarding experience for me."
The scheme has also received recognition from the train drivers union with Kevin Lindsay, District Organiser for ASLEF saying: “We welcome this joint initiative and look forward to continuing to develop the driver apprenticeship scheme with Virgin Trains as this is a great opportunity to bring young people into the rail industry and particularly the driving grade.”
The latest scheme follows last year's successful pilot which received over 1,200 applications for three places on the training course.
It was a busy week last week for us with several trips to the Midlands. We continue to look for split ticketing savings with our peak time journeys where we are generally guaranteed savings of around 25%, but frequently more.
However, we continue to experience problems with the ticket gates at our local station in Peterborough.
Put simply the tickets we bought will not operate the gates. Put the ticket in and up pops a message suggesting the ticket is not valid at the station, or at the time its attempted use was made. What rubbish.
We tried a Peterborough to Oakham Anytime ticket and a Peterborough to Nuneaton Off Peak Day Return.
My good friend and rail ticket expert Barry Doe raised the problem months ago with the Rail Delivery Group and it seems that the gate coding on the tickets could be wrong.
The flows for the tickets we used last week which failed to work the gates are controlled by CrossCountry Trains. We have made contact with them by Twitter and they said they would investigate. We await their response.
We recently received a Press Release from National Express West Midlands which caught our attention.
Is it really 40 years since bus conductors in Birmingham last donned a ticket machine and uttered the words “any more fares please”, or words to that effect.
Yes, it seems it was - 17th March 1978 to be precise.
How time flies!
Now 40 years on from the last day of West Midlands Passenger Transport Executive (WMPTE) conductor operations, National Express West Midlands is hoping to locate two former employees that were photographed in Acocks Green.
John Robinson, a keen bus enthusiast, contacted the bus operator to ask for help in tracking down those photographed.
The image shows the pair on Westley Road in Acocks Green.
John said: “I think at the time I took the photograph it was a crew changeover, so if it was the end of their shift the conductress will have just issued her last tickets and would probably have been a very poignant moment for her.”
To mark the forty year anniversary, National Express West Midlands has offered to help John recreate the same scene, with the same individuals pictured next to a current double-decker.
Tom Stables, Managing Director of National Express West Midlands said: “We really hope that somebody might recognise the lady and gentleman in John’s photograph. There is so much history behind public transport in our region and we would love to mark this forty year anniversary by recreating the scene.”
It was obviously a difficult day for Stagecoach and Virgin yesterday. Whilst the Virgin Trains’ West Coast operation was celebrating the news that it had been given a twelve month direct award by the Department for Transport (DfT) and would run the West Coast franchise until 31st March 2019, the news on the East Coast was somewhat less palatable.
The East Coast team was digesting the news that the Transport Secretary, Chris Grayling MP, was calling in the franchise deal earlier that the revised 2020 termination date that he announced at the end of last year.
The West Coast team is now planning for a further 12 months in change and there is even an option to extend that direct award for up to another 12 months from 1st April 2019. All good news for the West Coast team.
The West Coast direct award will bridge the gap until the new West Coast partnership franchise, which will also include the start of HS2 services, starts.
West Coast passenger benefits from the deal will see the on board equipment which is used to provide WiFi on the 56 Pendolino trains upgraded and future-proofed so that it will work with the new 5G mobile phone networks when they come on stream. The upgrade will take place over the rest of the year and is due to be completed by January 2019 when Wi Fi will be provided free of charge for all passengers on West Coast’s Pendolino fleet.
So what about the West Coast Voyager trains you may ask? Well, the most Virgin will say is that it is exploring options. That could mean that logistically it is not easy to upgrade the on train kit, or the Voyagers may not feature in the West Coast franchise long term. Whatever the reason it is sure to alienate North Wales passengers and those finding their Euston/Birmingham-Scotland train is operated by a Class 221 Super Voyager unit, when it seems Standard passengers will have to rely on slower WiFi provision.
Welcoming the new deal, Phil Whittingham, Managing Director of Virgin Trains on the West Coast commented: “Virgin Trains has led the industry for more than two decades, and I’m delighted that we have secured a new contract to continue operating on the West Coast. The investment will see a big improvement in our on-board WiFi, and follows our industry-leading innovations such as automatic delay-repay and free films and TV on board via our Beam app.
“I’m pleased that we’ll be able to offer almost all of our customers access to the improved WiFi for free. We know WiFi is a top priority for our customers and I’m sure they’ll welcome the upgrades to both speed and availability.”
In addition to the WiFi improvements on board, Virgin Trains will also investigate eliminating ‘not-spots’, - places without mobile phone coverage, on parts of its network.
Other initiatives included in the new contract are:
All station ticket machines upgraded to accept contactless payment.
More than £3m to improve station and on-board environments, including additional seating at stations and improved toilets, lighting and carpets on board.
Additional staff at stations during busy times to improve accessibility.
Better customer information during disruption through improved customer contact system.
New apprenticeship opportunities, including for train driver roles.
So let’s transfer to East Coast and back last year Stagecoach/Virgin expressed concern that its’ business plan was being severely impacted by the delays to major route improvement schemes. Discussions with the DfT were started.
The Government then announced that it was looking to start a new-style East Coast Partnership franchise in 2020, which meant the existing deal with Stagecoach/Virgin, which started in 2015 would end early.
Fast forward to January 10th this year and the Transport Secretary informed MPs that contingency plans were being prepared for running train services on the East Coast route.
Then just three weeks later Grayling was back in the House on February 5th and told MPs that “Despite delivering significant returns to the taxpayer and having some of the highest passenger satisfaction scores in the country, the lead operator of the franchise, Stagecoach, has been incurring significant losses.
“Since 2015 the franchise has met all its financial commitments to the taxpayer, returning nearly £1 billion to the public purse. But this has come at a substantial cost of nearly £200 million to Stagecoach”.
Chris Grayling had previously said that the East Coast franchise would in due course run out of money and will not last until 2020. The statement made on February 5th 2018 confirmed the situation is now much more urgent. “It is now clear that this franchise will only be able to continue in its current form for a matter of a very small number of months and no more.
Last week, following detailed analysis, my department issued the franchisee with notification that the franchise had breached a key financial covenant”, said Grayling.
Whilst it is business as usual and Stagecoach/Virgin will continue to operate the East Coast with no impact on services, staff or passengers the DfT is seeking, in what it says will be the ‘very near future’ to “end the contract and put in place a successor arrangement to operate this railway”.
In his statement to MPs, Chris Grayling said: “There has been much misinformation about this franchise so it is worth stressing again at the outset that - because payments to the government have been subsidised by Stagecoach the taxpayer has still profited financially from this franchise. Passenger satisfaction is high and preparations are well under way to deliver state-of-the-art new trains on the route.
“The problem is that Stagecoach got its numbers wrong. It overbid and is now paying a price.
“Contrary to widespread speculation, no deal has been done and I have not yet made a decision on the successor operator to run the East Coast railway until the long-term plans for the integration of track and train can begin in 2020. There is no question of anyone receiving a bailout. Stagecoach will be held to all of its contractual obligations in full.
“The priority now is to ensure the continued smooth running of the East Coast franchise for its passengers. I have therefore asked my officials to conduct a full appraisal of the options available to the government to ensure continuity of service until we implement the East Coast Partnership on the route from 2020”.
One of the options available to the DfT is to consider the possibility of Stagecoach continuing to operate services on the East Coast under a very strictly designed and short-term arrangement.
However, says Grayling “given the circumstances in which the government is having to step in to protect passengers on this line, I am only prepared to consider this option on the basis that the franchise would be operated on a short-term, not-for-profit basis. The only acceptable financial reward for Stagecoach would be received at the end of the contract and only in return for clearly specified passenger benefits being delivered. The company cannot be allowed to continue running this franchise and making a profit given what has happened. They got their sums wrong and they will pay the price for that - not the taxpayer.
“The alternative option is that the East Coast franchise would be directly operated by the Department for Transport through an Operator of Last Resort. My department will subject this option to the same rigorous assessment to establish whether it will deliver value for money for taxpayers and protect the interests of passengers. This option is currently on the table and will be selected if the assessment that I have set out determines that it offers a better deal for passengers and taxpayers than the alternative.
“In either scenario, the East Coast Mainline is expected to deliver substantial revenue to the taxpayer. The line will also continue to deliver premium payments to the government once the East Coast Partnership is in place from 2020. Let me be absolutely clear: the East Coast franchise will deliver a healthy operating profit for taxpayers. It has over the course of this franchise so far and it will in the future.
“There will be those who claim that because Stagecoach overbid, it should be excluded from bidding for future franchises. The legal advice on this is clear. As Stagecoach is meeting its financial obligations to support the franchise, including with the full parent company support, and because it has operated the services on the East Coast successfully, the department has concluded that there are no adequate legal grounds to restrict it from bidding on current and future franchise competitions on this basis.
I will therefore follow that legal advice. But let me be clear - we will keep its eligibility for current and future bids under close scrutiny and constant review.
Mr Speaker, it is vital that we continue to focus our attention on delivering benefits for passengers across the network and secure the benefits of privatisation.
The Government has confirmed that Stagecoach will be able to bid for future rail franchises.
Said Grayling: “As I have previously said, the government has no adequate legal grounds to restrict Stagecoach from bidding. But the competition will be run on a fair, transparent basis, including new safeguards against overbidding. Ultimately, the winner will be the firm that offers the best service to passengers and best value to the taxpayer.
“In a competitive market, franchises will sometimes fail. When that happens my duty is to protect passengers and taxpayers and ensure continued investment in the railway. Stagecoach has paid the price for failure as stipulated in its contract. Passengers on the East Coast Mainline can be assured that services will continue as normal. This government will undertake a transparent appraisal of the options available to ensure passengers and taxpayers are protected”.
Stagecoach has been shortlisted to bid for the new East Midlands Trains franchise due to start in August 2019. Stagecoach is the current incumbent operator.
Stagecoach operates the East Coast franchise with Virgin in a 90% (Stagecoach) and 10% Virgin partnership. The arrangement for the planned West Coast Partnership franchise will see Stagecoach, Virgin Group and SNCF, bidding as West Coast Partnership Limited, have been shortlisted for the West Coast Partnership franchise. Stagecoach has a 50% share in the bid vehicle, with a 30% share held by SNCF and the remaining 20% owned by Virgin. The DfT plans that the franchise will include current West Coast services and the first few years of operation of High Speed 2 services
The West Coast franchise is currently operated by Virgin Rail Group in which Virgin has a 51% shareholding and Stagecoach 49%.
Stagecoach has been shortlisted to bid for the new South Eastern Trains franchise and on February 5th 2018 announced that it intends Alstom to partner its bid with Alstom becoming a 20% shareholder if the bid is successful.
A statement issued by Stagecoach Group says: “Virgin Trains East Coast ("VTEC") is continuing to progress a £140m investment programme for customers. In the latest Transport Focus survey, the business achieved the highest passenger satisfaction rating of any franchised UK rail operator. Additionally, franchise premium payments to the DfT are significantly higher than when the route was operated in the public sector. The average four-weekly premium payments made during VTEC's operation of the franchise are over 30% higher than those made during the period of public ownership. This step-change in delivery for both passengers and taxpayers has been achieved despite a challenging economic environment, increasing political uncertainty, significantly lower rates of growth across the UK rail network over the past two years and sustained poor performance by Network Rail. VTEC is pursuing claims against Network Rail for sustained poor performance.
“Consistent with the Government's model of UK rail franchising, the East Coast franchise includes a contractual commitment by Stagecoach to fund VTEC up to an agreed amount in circumstances where the business does not meet its original financial plan. This was agreed prior to the commencement of the franchise in accordance with the Government's specification during the procurement process and Stagecoach has met its contracted funding commitments. Those commitments include £165m of funding that has already been provided by Stagecoach and Virgin to VTEC.
“A significant element of the expected passenger revenue growth and associated payments to Government from 2019 was linked to expanded timetables, reduced journey times and extra services. These developments were predicated on a package of extensive Network Rail infrastructure enhancements. It has been clear for some time that significant elements of these enhancements will either be delayed or not progressed. As a result, it has also been clear for some time that looking forward the franchise contract, including premium payments to DfT, needs to change to reflect these materially changed circumstances.
“The Secretary of State for Transport announced on 29 November 2017 new plans for the wider UK rail network. This included the introduction of a new public-private partnership on the East Coast route from 2020 under a new competitively tendered East Coast Partnership franchise. Since that announcement, VTEC has been in discussion with the DfT about the transition to the new East Coast Partnership franchise. Stagecoach notes the comments by the UK Secretary of State for Transport today that he intends to ensure that any new commercial terms agreed with VTEC for its continued operation of the East Coast rail services will be on a "not for profit" basis but that a fee would be payable at the end of the contract period based on VTEC meeting specified obligations.
“Since announcing its interim results on 6 December 2017, Stagecoach has seen a hardening of the DfT's negotiating position, coinciding with increased media and political scrutiny around Government contractual relationships with the private sector generally and on rail specifically. The comments by the UK Secretary of State for Transport reflect an evolution of the DfT's position on the East Coast franchise.
“We remain focused on seeking to reach an agreement with the DfT to facilitate the transition to the new East Coast Partnership franchise and to address a number of contractual matters relating to the changed circumstances affecting the current franchise contract. The DfT has advised us that it also wishes to reach such an agreement, whilst maintaining a robust position in discussions”.
Stagecoach says that it is continuing discussions with the DfT, which includes seeking to understand the detailed implications of the statement made on the future of the East Coast franchise by the Transport Secretary.
Commenting on the new rail developments, Stagecoach Chief Executive, Martin Griffiths, said: "Our partnership with Virgin on West Coast has delivered two decades of investment, innovation and a step-change in customers' experience of rail travel. The new West Coast contract will build on that and ensure a strong foundation for the start of the new West Coast Partnership franchise.
"We are also pleased to have been shortlisted for the new East Midlands franchise. At East Midlands Trains, we are proud of the improvements we have delivered for customers and our people over the past 10 years, and we look forward to working with local stakeholders on our plans to maximise the benefit of the railway for the regional economy.
"Virgin Trains East Coast is progressing a £140m investment programme for customers and delivering significant payments to the taxpayer. Contrary to much misinformed recent comment, we have neither walked away from the East Coast franchise nor asked for, or received, any special treatment. We have accepted our share of risk agreed with the Government at the time the franchise was let. At all times, we have acted with professionalism and integrity by fulfilling Stagecoach's obligations to fund the franchise, even in challenging times and with changed circumstances.
We are also continuing our discussions with the Department for Transport about new contractual arrangements to facilitate the transition to the planned new East Coast Partnership in 2020.
"Our proposal for a collaboration with Alstom to bid for the South Eastern rail franchise aims to combine Alstom's knowledge of infrastructure and rolling stock, with our operational expertise and customer service focus. The proposed arrangement supports our vision of delivering a more integrated and innovative rail service for the customers and local communities who depend on what is one of the busiest rail networks in the UK."
We realise this is a long Blog item, but we have received many requests to detail what happened on February 5th 2018
and what the next steps are likely to be