The East Coast Mainline (ECML) proves once again to be the most troublesome rail franchise.
In previous years just two private * train firms namely GNER (Great North Eastern Railway) and National Express East Coast (NXEC) have taken on the ECML franchise.
Both failed and had to hand back the keys. GNER found its £1.3 billion in fees unaffordable, and similarly NXEC discovered its £1.4 billion in payments unmanageable.
Now it’s the turn of VTEC (Virgin Trains East Coast) to run into financial difficulties.
So one wonders why VTEC (90 per cent owned by Stagecoach and 10 per cent by the Virgin Group) thought it could afford payments totalling £3.3 billion over the eight years of the ECML franchise.
It turns out that VTEC’s bid was based on over optimistic forecasts for passenger and revenue growth. VTEC is saying that both have fallen below expectations and its franchise payments have become unaffordable.
The problem is of the government’s making. It treats the ECML as a premier franchise partly because it was the last mainline to be electrified and partly because it’s the UK’s fastest rail route.
Therefore to secure the franchise means any potential operator must bid a lot of money.
Will this situation affect VTEC customers in the long run?
It will, because travellers were promised more trains, more capacity (extra seats to alleviate overcrowding), faster trains and, last but not least, new Hitachi Azuma trainsets.
Industry publication Passenger Transport quotes a Stagecoach spokesman as saying the new Hitachi trainsets (which were intended to operate the faster and more frequent services from 2018) would be received [delivered to VTEC] later than expected.
However by not introducing the above-named service improvements VTEC might escape having to pay so much money to the government (in franchise fees).
Further developments are awaited.
* (The last ECML operator was government-owned East Coast so cannot be included for obvious reasons).