West Coast Main Line franchise shambles - possible impact on Great Western franchise?

[whole diary]

[ROGace]

after using FGW^▸ (First Great Western) from Paddington regularly from 2005 onwards to Bath, Worcester, Taunton, Devon and Cornwall i have no wish to see them lose their franchise as it seems they are doing a pretty good job.

I never have really had many problems on my travels and i like the 1st class services on the HST^▸ (High Speed Train) ( i am not a commuter)

may i ask who else maybe in the running for renewal when it happens

thanks

[JayMac]

may i ask who else maybe in the running for renewal when it happens

There's nobody in the running at the moment. The franchise tender issued in late 2011 has been cancelled and a new Invitation to Tender will go out in late 2015 for a 15 year franchise beginning in July 2016. The bidders for the cancelled franchise were First Group, Stagecoach, National Express and Arriva UK^▸ (United Kingdom) (part of Deutsche Bahn).

At the moment the incumbent, First Great Western, has a franchise that will end in October of this year. The original termination date was the end of March, but the DfT^» (Department for Transport - about) has exercised it's contractual right to extend this by 28 weeks. First Group are negotiating with the Department for Transport for a management contract to run from October 2013 for 33 months until July 2016. Rather ironically this is only 3 months beyond the date at which the existing franchise would have ended, had First Group decided to take up the optional 3 year extension that was allowed for in the 2006 franchise agreement. They decided not to take that extension because the premium payments were heavily backloaded toward the end of the franchise and it was likely that they would be on something of a loser in those three years to 2016. You can't really blame them for not taking up the option to extend. It would likely have been a poor commercial decision to continue. Their share price and debt hasn't been particularly good over the past two years. Certainly not a company I'd be investing in if I had a bob or two to spare. It's also worth remembering that First Group went all guns blazing for the InterCity West Coast franchise. And we all know what happened there.

I've no doubt that the deliberations over the management contract are complex. Probably with both First Group and the DfT playing hardball. First Group will want a decent return for their shareholders and the DfT will be trying to ensure the best deal for the Treasury and the taxpayer. What's best for the passenger probably comes after that.

There's no other player in the game for this management contract. If an agreement is not reached then Directly Operated Railways (i.e. the Government) will have to step in. I think though that this predominantly Conservative administration will be doing all they can to avoid that. It won't sit well for them to nationalise (albeit temporarily) a major part of the rail network. So, while both sides will likely be playing hardball, I fear First Group's ball is the one that will be harder. If not, then they'll be taking their ball and going home.

[Southern Stag]

They decided not to take that extension because the premium payments were heavily backloaded toward the end of the franchise and it was likely that they would be on something of a loser in those three years to 2016. You can't really blame them for not taking up the option to extend. It would likely have been a poor commercial decision to continue. Their share price and debt hasn't been particularly good over the past two years. Certainly not a company I'd be investing in if I had a bob or two to spare.

I don't know if anyone else saw the TOC^▸ (Train Operating Company) probability figures published in Modern Railways recently but they were quite interesting. FGW^▸ (First Great Western) made an operating loss of ^52.3million in 2011, a profit of ^9.5million in 2010 and a loss of ^12.8million in 2009. If they had taken up the extension with the huge premium payments involved the losses would probably have been huge, you can certainly see why FGW didn't want to have the extension.

[Timmer]

while both sides will likely be playing hardball, I fear First Group's ball is the one that will be harder. If not, then they'll be taking their ball and going home.

Along with the five or so HST^▸ (High Speed Train) sets that First own.

[TonyK]

First Group's shares rose over 7% today when analysts from Bank of America Merrill Lynch said they thought the eventual result of the contract extension talks could be a rise in value of 20%. I am no barrack-room stockbroker,but I have thought since shortly after the franchise talks were put on hold that First could walk away from this with both the penny and the bun. BNM is right when he says that the deliberations will be complex, but First's seat at the poker table will be a comfortable one. The whole negotiation round will be underpinned by DfT^» (Department for Transport - about)'s fear of another cock-up, and the short duration of the extension means that the acceptable margin for error will be wider than in the main re-franchising - if anyone really knows what the end result should be. I believe the brief will be to get FGW^▸ (First Great Western) onside at reasonable cost, if not any cost. DOR is an acronym likely to strike more fear in the hearts of the of officials than DOA.

FGW, as many here have said, did no wrong in walking away from the original extension. They coped with a lot in the early years that was not within their control or expectation, didn't do a bad job, but probably didn't see enough potential improvement in the extension period to justify the premiums they would have had to pay. They may ask a price that will go some way towards making up for the disappointment, but they won't take the mickey. Forefront in the mind will be the chance to run brand new kit under brand new wires through state-of the-art stations like Reading for the first half of the operational life. Being helpful now will still be in the minds of the official side when the new franchise talks start in earnest. Having Merrill Lynch smile on your efforts is good news too. I'm not sure I am ready to dip my own hand to my pocket  and buy shares just yet, but I may look further into this. I will not, however, use my entire investment fund. Apart from putting everything on one horse being imprudent, a half-empty gallon whiskey bottle looks daft by the fireplace.

[JayMac]

What I'd like to see from this 33 month period under a management contract is for both the DfT^» (Department for Transport - about) and First Group to look at trialing some of the 'priced options' that were in the now cancelled Invitation to Tender for the franchise that was due to start this year.

Whilst some of the 'priced options' were dependent on future infrastructure, others such as TransWilts, Heart of Wessex, Riviera Line, Bristol Metro (on existing infrastructure) and Cornish branch lines are possible to implement. DMU^▸ (Diesel Multiple Unit) rolling stock availability would be the major constraint for these improvements, but some strategic use of loco-hauled Mk2^▸ (Mark 2 coach)/3s of which there is, I believe, enough available for spot hire, could allow for these priced options to be tested to see what the passenger loadings and revenue are. I'm not suggesting that loco-hauled should be used exclusively for these 'priced options'. Rather, the spot hired stock be thrown into the rolling stock mix of the current Greater Western fleet so that it can be used either directly on 'priced option' services or on existing routes/diagrams to free up DMUs for use on the 'priced option' services.

I say this not because I'm misty-eyed about the possibility of seeing loco-hauled stock in my neck of the woods, but because I believe it would be an ideal opportunity to trial additional services where all the evidence suggests they are needed.

This ain't just an idea I'm touting from behind my keyboard. I've written to both my MP^▸ (Member of Parliament) and the Department for Transport.

Only reply thus far has been a generic 'thank-you for your correspondence' from my MP's office. I hope she'll look into my suggestions further. She is after all advocating for rail service improvements in and around Bristol.

[TonyK]

Bloody hell, bignosemac, that's nothing short of a brilliant idea! Bringing loco-hauled stock back to, say, Weston to Yate or Cardiff - Taunton or whatever would give a bit of relief to some peak commuters on those routes, and allow for a bit of medium-term experimentation during a clearly defined period. We could try Weston to Severn Beach or at least Clifton Down, to give an idea of how Portishead to SVB might work in addition to the existing SVB to BRI^» (Bristol Temple Meads - next trains) service. Or Trowbridge to Clifton Down, or - I'm getting a bit faint now.

It would give a relatively cheap way to validate some of the models used in measuring demand. Projects stand or fall on research and calculations by consultants, like Atkins, using methodology established by DafT. Yet the Fareham to Gosport BRT^▸ (Bus Rapid Transit) has performed disappointingly against their projections, whereas the Ebbw Vale railway figures have exceeded expectations quickly.

bignosemac, you are some kind of genius!

[John R]

Bringing loco-hauled stock back to, say, Weston to Yate or Cardiff - Taunton or whatever would give a bit of relief to some peak commuters on those routes,

It would give a relatively cheap way...

Since the latest capacity enhancements is there actually any need for relief on these routes? I haven't seen any comment re overcrowding for ages.

And I'm not sure that loco-hauled + coaches is a relatively cheap way, particularly if you need a loco on each end. I suspect it was a last resort that was used when DaFT^» (Department for Transport - critical sounding abbreviation I discourage - about) realised they had screwed up and needed to buy some time.

[trainer]

I used the loco + coaches for real (as opposed to 'just for the ride') when I was more regularly travelling from Yatton and I cannot believe it is a cheap option.  The coaches I travelled in certainly looked their age inside and - like a fairy tale myth - all the seats lined up with the windows and had tables!  This is of course lovely, but not very economical in the present way of things.  Thus, welcome as the traditional way of free range transport is (as opposed to battery conditions [think chickens]), it meant that as many people had to stand as could sit sometimes.

On the plus side, a trial to assess demand which doesn't involve lots of investment in new kit which will take some time to procure, is an idea I could easily support.

bignosemac, you are some kind of genius!

This statement is of course true - we are currently working out what kind! 

[Chris from Nailsea]

... I've written to both my MP^▸ (Member of Parliament) and the Department for Transport.

Only reply thus far has been a generic 'thank-you for your correspondence' from my MP's office. I hope she'll look into my suggestions further. She is after all advocating for rail service improvements in and around Bristol.

I'm sure she will, and she is.

[swrural]

Bringing loco-hauled stock back to, say, Weston to Yate or Cardiff - Taunton or whatever would give a bit of relief to some peak commuters on those routes,

It would give a relatively cheap way...

Since the latest capacity enhancements is there actually any need for relief on these routes? I haven't seen any comment re overcrowding for ages.

And I'm not sure that loco-hauled + coaches is a relatively cheap way, particularly if you need a loco on each end. I suspect it was a last resort that was used when DaFT^» (Department for Transport - critical sounding abbreviation I discourage - about) realised they had screwed up and needed to buy some time.

Isn't there a similar trial going on to take the workers to Windscale  ('oop nawth').

[JayMac]

Where is this 'Windscale' of which you speak? I cannot find it in my rail atlas.

[swrural]

Ah, so young (envy)!  Try Google and all will be revealed.   

[JayMac]

Ahh, so that'll be Sellafield, a name which predates Windscale. Re-named Windscale when the ordnance factory was converted to nuclear materials production and then later reverted back to its original name. 

[swrural]

   That's the one.  I prefer the euphemism, which became the opposite, a curse (not by me, mind).