Govt now wants to "bail out" Virgin Trains East Coast

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This topic contains 9 replies, has 8 voices, and was last updated by  canucklad 1 Dec 2017
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  • AMcWhirter
    Participant

    Readers who have read our news last July (see below) will know that VTEC (Virgin Trains East Coast) is struggling to pay its huge ECML franchise fees to the government. These fees are currently set at *£3.3 billion* over the life of the franchise which ends in 2023.

    Virgin Trains East Coast reports losses

    Today the government published a ‘strategic vision’ for rail and part of it talks about wanting to end the ECML franchise in 2020 which is three years earlier than planned.

    Andrew Adonis* has tweeted, “REAL RAIL STORY TODAY HMG is bailing out Stagecoach/Virgin ** on East Coast because they overbid. Franchise was due to end in 2023. HMG has now, incredibly, agreed to replace it by a ‘public private partnership’ in 2020. They should have kept my public EC company in place. DfT has serious questions to answer about the fiasco on EC and why they are (in effect) bailing out Stagecoach/Virgin with taxpayers’ money.”

    * Andrew Adonis is Chair of the National Infrastructure Commission and the former Transport Secretary.
    ** VTEC is 90 per cent owned by Stagecoach by only 10 per cent owned by the Virgin Group.

    Further developments are awaited.


    LuganoPirate
    Participant

    This is typical. It’s not the first rail co who’s overbid and is struggling and then has ton be bailed out in one form or the other by the Government. Any bids should be accompanied by a bank guarantee that ensures if the company cannot pay out then the bank is on the hook.

    In any case, despite the fact I’m a firm believer in capitalism, I’m in favour of the denationalisation of railways, electricity and water. These are much to important to be left in private hands.


    AMcWhirter
    Participant

    The Guardian has now published a major piece.

    Stagecoach shares “jumped 12 per cent” after the news [from the govt].

    It’s reported that VTEC, which has been making losses on its franchise payments, is now “likely to pay a fraction of that sum” which as I noted above is £3.3 billion over the life of the ECML franchise.

    https://www.theguardian.com/uk-news/2017/nov/29/east-coast-rail-franchise-terminated-three-years-early-virgin-trains


    Flightlevel
    Participant

    Route was tun by the government before VT took over,very well and at a small profit returned to government.
    VT took over and have raised fares atleast three times in just over a year and out of rush hours,many empty seats they don’t sell at their prices!
    Now they complain they bid too much,lets nationalise this line and see if it works well like before and then re-nationalise the other lines if they give a return to taxpayers!


    Frederic
    Participant


    Swissdiver
    Participant

    This is typical. It’s not the first rail co who’s overbid and is struggling and then has ton be bailed out in one form or the other by the Government. Any bids should be accompanied by a bank guarantee that ensures if the company cannot pay out then the bank is on the hook.
    In any case, despite the fact I’m a firm believer in capitalism, I’m in favour of the denationalisation of railways, electricity and water. These are much to important to be left in private hands.

    I am 100% in agreement. Switzerland was pragmatic enough to refuse to fully privatise these domains. And the result is there. We have the most efficient rail network in the world…


    AMcWhirter
    Participant

    This morning Andrew Adonis has tweeted numerous times about ECML.

    Here is the first of seven tweets from @Andrew_Adonis

    “RAIL FRANCHISE CRISIS. Chris Grayling accepted today in Commons that he is bailing out Stagecoach *
    allowing them to cancel loss-making East Coast franchise three years early. This will cost the taxpayer hundreds of millions and is inexplicable to me in public policy.”

    * The ECML franchise is 90 per cent Stagecoach but only 10 per cent Virgin Group.


    drflight
    Participant

    In the weird world of UK railways strange things happen. After the demise of GNER on the East Coast Route in 2007 (due to financial problems) the franchise was taken over by National Express East Coast. After the demise of National Express East Coast in 2007 (due to financial problems) the Department of Transport sets up a holding company, Directly Operated Railways Ltd, to run the East Coast line. This government owned entity, East Coast Trains, operated successfully, seemed to be popular with most passengers, and managed to return to the taxpayer, i.e. the Government, over £1 billion between 2009 and 2015 (it repaid £235 million the the last year alone) before the route was franchised out again, Stagecoach (in this case it is Stagecoach 90% and Virgin 10% joint ownership), as Virgin East Coast, being the winning bid. Only now they too are having financial problems and admit overbidding in the first place.

    At the time Department for Transport said in a statement: “While the East Coast franchise has been stabilised under government ownership since 2009, the route now needs a long-term private sector operator to plan for the future and meet the increasing demands for more trains serving even more destinations.”

    Now that franchise is to be terminated three years earlier and plans are afoot, as part of the Governments Strategic Vision for rail, to create a new East Coast Partnership to be “the first of the new generation of long-term regional partnerships on the East Coast Mainline, which will be introduced from 2020 – the East Coast Partnership between the public sector and a private partner will be operated by a single management, under a single brand and overseen by a single leader.”

    I rather suspect future rail historians will look back at the Government run ‘re-nationalised’ period from 2009 – 2015 as a ‘golden era’ on the East Coast route!


    greyhawkgeoff
    Participant

    It is all too easy to blame Stagecoach for overbidding, but a goodly proportion of their financial woes is caused by the contract they signed up to, in which Network Rail promised a number of upgrades to increase capacity that either have not happened or are running years late. This adversely affects their capacity and ability to generate more capacity and income through faster journey times – a well known effect of service improvement.

    Add to that the Office of Rail Regulation has agreed to the increase of open access operators on the length of the route from Edinburgh and the West Riding into London, plus if my memory serves me well more capacity from Hull Trains. These double whammies plus the slow down in the economy have led to Stagecoach missing or delaying their ridership and revenue targets with no hope of catching up during the franchise agreement, hence the early termination in favor of a management contract.

    And while I am taking a swipe at the DfT, it is they that specified and chose the Hitachi built new IEP trains, Virgin East Coast have to use them for the best part of 30 years. Industry sources – per Modern Railways – suggest that this was a political decision based upon Hitachi building a new assembly plant in Newton Aycliffe, County Durham. But the same sources suggest that a further tranche of Alstom Pendolinos similar to the West Coast fleet would be obtainable at little more than 50% the cost per vehicle per month. Who pays for this largesse? Its a no brainer, the passenger or taxpayer.

    Rightly or wrongly the DfT needs Stagecoach to stay in the rail business, given that it runs the West Coast route and East Midlands Trains currently. In the past year they (Stagecoach)lost the South West Trains franchise after 20 or so years to a First/MTR consortium having been out bid by the latter, who in the trade are viewed as again having bet the kitchen sink on rising passenger numbers, numbers that at present are in slow decline after a couple of decades of constant growth. I bet that the guys that put these two franchise bids together are not too keen to put that on their c.v!


    canucklad
    Participant

    Our public transport system is an unmitigated disgrace, thanks to successive governments ( blue, red and yellow) sticking to outdated Thatcherite dogma.
    As a result we all pay significantly more for substandard, non-integrated trains, buses, trams taxi’s etc.

    And the cynical me, says as tax payers, nothing is going to change, so let’s stop grumbling and did deeper to rescue a privatised company, yet again.

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