What to do with rail assets….

The announcement today, 27-11-14, that the ECML franchise is to be taken out of the hands of the UK government DOR(Directly Operated Railways) and awarded to Inter City Railways (operating as “Virgin Trains East Coast”)is a worry to some and a relief to others.

http://www.businesstraveller.com/news/101078/virgin-and-stagecoach-awarded-east-coast-franchise

It is a worry because Virgin Trains(Virgin group + Stagecoach) already operates the West Coast franchise. In that case is competition being reduced on the two mainline London/Scotland routes? On the other hand is this the death knell for Virgin Trains (West Coast) whereby it is to be replaced by another operator?

It is a relief to many because the danger that an important headline asset is not to be handed over to a consortium comprising French, German or Dutch government controlled railways. It sounds like a good political “fix” after the waves of protest in the last few weeks.

But what of DOR? Does it have a future? For that matter what are the UK government´s plans to sell off its 40% stake in Eurostar? Here the other shareholders are the goverment controlled railways of France(SNCF 55%) and Belgium(SNCB/NMBS 5%). In June 2014 the UK part was transfered from London and Continental Railways(LCR) to HM Treasury prior to sale. LCR seems to now have a solitary role in selling UK rail assets.

http://www.lcrhq.co.uk/about-lcr/

This poster questions whether it is wise for the UK government to sell all its rail assets when its continental competitors are benefiting their shareholders from the free market permitted in the UK while the other countries drag their feet or are even outrightly opposed to open competition?

Would it not be wiser to promote a strong UK based company,such as LCR, at least majority owned by the UK government, which could take over the 40% share owned in Eurostar…… which could provide competition to the newly privatised East Coast franchise by taking over the West Coast franchise from the same operators……..and enter into continental markets to promote competition against government controlled incumbents?

Let us say enough is enough.

Earlier this year, SNCF appeared favourite to buy Eurostar.

It made sense at that time since Eurostar is essentially a French product. Indeed all ticketing/reservations etc is handled by SNCF at Lille and, of course, the existing trainsets are essentially a modified TGV.

http://www.telegraph.co.uk/finance/newsbysector/transport/10963571/France-has-option-to-buy-UK-taxpayer-stake-in-Eurostar.html

Whether it is down to LP’s observation or another reason Alex, according to the article, SNCF ruled themselves out in October leaving it open season.

However as SNCF will still remain the majority shareholder, methinks although it may supress the price a touch it may attract more diverse talent/experience resulting in an enhanced service/offering.

UK PLC sells its 40% stake in Eurostar to Hermes and Caisse de dépôt et placement du Québec for £750m

http://www.telegraph.co.uk/finance/newsbysector/transport/11448231/Government-nets-750m-from-Eurostar-stake-sale.html

This article also appeared in Railnews 2-3-15 about Virgin East Coast.
“Virgin promises new £3m East Coast fund.”
…..”for the benefit of ‘customers and communities’.” whatever that may mean. However, it is peanuts when compared to the promised “£140 million of investment” by the new franchisee. This includes “£21 million to refresh the existing fleets”.

Rail minister, Claire Perry, indicated that this investment …”could not have been forthcoming from public resources.” This sounds strange to me when EAST COAST DOR has handed back to the government one thousand million pounds sterling during the period of its existence (2009-2015). Could that “profit” not have used for investment? Wierd politicspeak to me.

http://www.railnews.co.uk/news/2015/03/02-virgin-promises-new-3m-east.html

Virgin East Coast reckon they can pay the government £3.3 billion over the course of its eight year franchise. We shall see.