National Express East Coast Speculation

[andel]

It is rumoured that National Express East Coast is to switch to a management deal after the recession has caused them to make a stonking loss...

Comments welcome.

[JamieLei]

This week's Rail Management will be out tomorrow since today is a Bank Holiday, but it's bound to have a piece on NXEC's fortunes.

However there is a good article from last week about TOCs' fortunes in general in the downturn.

I think this is the biggest worry at the moment:

But in hard times First class travel tends to be a casualty, and there are now signs of widespread downgrading. This is eroding the revenue of intercity operators where it really hurts, because in normal times First Class passengers are very profitable. By comparison, commuter operators offer at most a very modest version of First Class (which also forms only a small proportion of their trains). Downgrading on these services is presumably a minor issue.

[Kevo00]

This isn't really surprising as NatEx paid well over the odds for the franchise in the first place - which was stupid, as their predecessors were struggling in a boom!

Only a matter of time before the rest of the industry, particularly Cross Country with its high fuel costs, starts suffering.

Guess who'll have to pick up the tab?

[Dave]

Guess who'll have to pick up the tab?

Still, better to have the railways privatised so we don't have to pay for EVERY f*** up on the railway, eh?

[JamieLei]

A good explanation from the Raymond Lim, Minister of Transport of Singapore, as to why I support a privatised railway. With increasing calls for Nationalisation, I still think it's the wrong way to go.

From http://www.pap.org.sg/articleview.php?id=3574&cid=86

And related to this, is the view that if you don’t make the operators have a profit incentive, somehow the cost will go down. But it doesn’t work that way. The operators would then have no incentive to lower the cost because the State is paying for it.

You will find that once you take away this profit motive from the public transport operators, the cost starts to go up. And you can see that in many examples. In Jakarta, you have the same bus fares but one entity is run by the State and another one is run by a private company. The private entity always makes a profit, but the one owned by the State always asks for more subsidies. But they both operate under the same conditions.

Take the example of Adelaide, where previously the bus operator was owned by the State. They told us that when they introduced the profit motive, the cost dropped by 20 per cent because there is now an incentive to be efficient where previously there was none.

Contrary to what people think that by taking away the profit motive the cost goes down and fares will be lower; the opposite, based on evidence, would likely to happen. So many countries are actually introducing this sort of framework. London has done it since the mid 80s. Adelaide and Perth are also doing that.

[orudge]

You will find that once you take away this profit motive from the public transport operators, the cost starts to go up. And you can see that in many examples. In Jakarta, you have the same bus fares but one entity is run by the State and another one is run by a private company. The private entity always makes a profit, but the one owned by the State always asks for more subsidies. But they both operate under the same conditions.

In some situations, that does seem to be the case. For instance, NorthLink is the state-sponsored ferry company operating ferries to Orkney and Shetland. Pentland Ferries is a private company that offers a much cheaper service across the Pentland Firth to Orkney, without any state money. (But of course, it doesn't run Aberdeen or Shetland ferries, which NorthLink does.)

However, in the UK with trains, we seem to have the train companies getting large amounts of money from the state anyway (despite being private), and still not providing that great a service (although a lot better than it was, I guess). Whereas the likes of Wrexham and Shropshire, while providing a less regular and slower service, do seem to be able to provide a good service, without any public money. Perhaps services should either be entirely privatised - with no subsidies - or entirely public, and not this middle ground we seem to have. The problem with the former, of course, is that companies will then only concentrate on routes that actually make them money. And with the latter, well, there may be wastage, but transport is meant to be a universal service, so even if it results in us spending an "unreasonable" amount on journeys that few people use, is it such a bad thing? (See, for instance, privatisation of postal services - imagine if the Royal Mail were completely privatised and they decided they didn't want to deliver mail to the North of Scotland because they deemed it too remote and unprofitable!)

Just my rambling 2p, anyhoo.

[Xander]

The big problem with the railways is they'll always be a monopoly. If I want to get from Belper to Derby, I have to use East Midland Trains Connect. There's no CC option and even if they wanted to put one on, the lines are already full.

The phallacy of comparing buses or ships or even planes with trains is that, for the most part, you can just stick another service in. The ferries are a prime example. The state runs a crap service, so an individual buys a ferry and does it better themselves. However, if a train company runs a crap service an individual simply can't buy a train, stick it on the tracks and do it better.

I'm all for the nationalisation of the railways as they'll always be a monopoly so should be controlled by the state.

[beeb375]

Well I reckon the competition on routes such as London-Birmingham helps improve service and such, but otherwise you have a point, kind of.

[JamieLei]

The problem with private companies is that they run only a few trains a day, and at infrequent times. I know off the top of my head that Virgin trains leave London for Birmingham at xx:03, xx:23 and xx:43, and Chiltern leave Snow Hill for Marylebone at xx:52 and xx:12. And that is every hour for the majority of the day, right through to about 9pm-ish. Our railways are still very much turn-up-and-go, and this only happens because it's mandated that it must be, likewise with the unprofitable-but-socially-necessary services such as late-night or rural trains.

The problem about having both subsidised and private services running alongside each other is that the private company may be stealing custom away from the subsidised service. This was the problem with WSMR stopping at Wolverhampton, which may have nicked Virgin's money, requiring more subsidy.

Sadly the Royal Mail is obliged to do a nationwide coverage, whereas DHL and TNT aren't which seems a little unfair. If I sent a package to Owen's Orkney home, would TNT refuse to take it or would to go as far as Inverness and Royal Mail it from there? Cross-subsidy seems to be the way forward atm with rail franchises, hence the bundling of the Anglia franchises and the Great Western franchises to make sure that Intercity subsidises Regional Railways.

I'm very much an advocate against a free-market railway. There has to be at least a minimum level of service acting in the interest of passengers, but TOCs must be free to innovate. But then when I say that I also feel the DfT has a right to prevent TOCs from doing ridiculous things, like Virgin's planned* 3+2 seating on Intercity. Sometimes I don't even know where I stand with regards to Railway Privatisation/Nationalisation.

*planned in 2002 with the Voyagers for Advance tickets.

[Dave]

The big problem with the railways is they'll always be a monopoly. If I want to get from Belper to Derby, I have to use East Midland Trains Connect. There's no CC option and even if they wanted to put one on, the lines are already full.

I don't think that this is a good argument for the renationalisation of the railways - the train company that runs your trains is specific to your area, and so they can provide the best service to you - "privatisation" doesn't mean "freedom of competition".

If a nationalised company ran your railway, it'd be a compromise to provide for all regions - at least with regional companies you have the knowledge that the company is focused on improving your area.

I'm very much an advocate against a free-market railway. There has to be at least a minimum level of service acting in the interest of passengers, but TOCs must be free to innovate. But then when I say that I also feel the DfT has a right to prevent TOCs from doing ridiculous things, like Virgin's planned 3+2 seating on Intercity. Sometimes I don't even know where I stand with regards to Railway Privatisation/Nationalisation.

This is more like it - by giving a full privatisation, you'd be taking away some services because they weren't profitable - the current system maintains a level of service unlike any other we've seen in the last 30 years of BR, but as Lei says - they need to be able to innovate which is currently not being allowed, and because of this, some companies are being stifled.

[Ameecher]

The problem with private companies is that they run only a few trains a day, and at infrequent times.

That's because they have to work in the current broken framework.

Edit: now says have rather than haven't.

[JamieLei]

The problem with private companies is that they run only a few trains a day, and at infrequent times.

That's because they haven't to work in the current broken framework.

And hence lies the exact problem. Is it really beneficial for the passenger to have only 5 trains per day to their destination? If I want to travel from Wolverhampton to Shrewsbury for a day trip, and WSMR was the only operator, I'd be extremely severely limited to when I could go and come back.

If your definition of "broken" is that operators can cherry-pick the best times to run trains and leave passengers stranded at all other hours, then I'm afraid you're completely missing the point of public transport.

[Ameecher]

Typo in previous post makes me look a complete knob. Woops. Please see editted post.

[Kevo00]

I honestly think the way forward requires two things:

1. We need to decide if we want the railway to include the loss-making socially undesirable services or not, or if they could be somehow be funded locally (unlikely given the UK's top heavy tax structure), or if patronage could be increased. I think that we might see government, probably the Tories, make big cuts to the required levels of service within a couple of years. Running a train with just three people on it is not necessarily socially desirable, even if the railway unions say it is!

2. Get rid of the franchise system. Not only does it restrict the possibility for innovation it also makes it difficult for companies to plan for the long term, and for those paying premium payments its difficult to generate the payments if you can't raise fares much or cut costs much, or there is a recession which cuts usage. Nor are there good precedents for the use of premium payments - ITV's experience of them since 1993 has not been a happy one.

3. Cut transactions costs. We have too many different parties involved in running trains in too many different firms and government money is being swallowed up in inefficient contracting. Even to run a train requires agreement between three different companies, on paper at least. Yet this is not a market where a train operator can switch to a different infrastructure provider nor even easily switch to a different rolling stock provider - such an arrangement is inefficient and prone to rent seeking. Have operators own their own stock and even look at if they could own their own infrastructure. Probably the way forward would be 5-6 regional groups with ownership of their own stock and infra, perhaps with 25 year concessions. You obviously can't get rid of some infra sharing (such as with XC) but you could get rid of a lot of the co-ordination problems in the more closed parts of the network by doing this, such as south of London or in Scotland. Also there would still have to be open access operators, but with such a concession system the need for them might be less as incumbent companies would have more incentive to invest in extending their services. But if operators controlled their own rolling stock fleets and infra there would probably be more scope for making savings and increasing productivity as these costs would no longer be fixed to operators.

I'm sure you'll all think these are terrible ideas, but thats the kind of course I'd follow if I were transport minister.

And yes Lei, wherever I've experienced 100% state run transport systems they have tended to be pretty poor - in recent years that includes Northern Ireland (though it is improving), and New South Wales among others (actually thinking back to when I was a sproglet BR was pretty horrific). In Northern Ireland costs are very high for a very slow service, while New South Wales just has a very slow and infrequent service with frequent delays. In both that applies to road and rail. Not good.

[JamieLei]

I agree with you on A LOT of the points, but personally I'd keep the franchises, make them larger and operating on 20 year leases like Chiltern is at the moment, which gives enough time for investment (ie: Chiltern Evergreen 3 to Oxford).

I personally think that Network Rail should still own the entire infrastructure and the knowledge required to maintain a safe railway. If the track is divided, one operator might make cuts and allow the track to degrade during a difficult business period, increasing the likelihood of an accident. A rushed job by an understaffed and underpaid track-inspectors could lead to faults not being detected, and the training and management would be split into different divisions, all with their own standards. There also might be conflicts of interest - the London Midland region may not be interested in keeping the Birmingham to Derby linespeed at 125 as it would only run local trains at 100mph for example.

----------------

Back on topic, a Times article about NXEC's struggles. The reader comments are as usual crap, misinformed and flameworthy.

http://business.timesonline.co.uk/tol/b ... 210941.ece

[buildstrong]

I think the railway should get privatised so there is no payment exerted at any and every place. And also if they have incurred a loss then it seems a better idea.

[JamieLei]

As promised, this week's RMOL comment about NXEC. Interesting reading

[Kevo00]

Sorry to bump but this seemed the best place to put it (as if you hadn't heard):

http://news.bbc.co.uk/1/hi/business/8127851.stm

I thought something was up yesterday when Bowker announced his resignation. Lets hope the government will scrap the unpopular reservation charge and perhaps bring back more catering. If Labour are still in when the franchise is re-let (unlikely) then it seems likely that catering will be part of the franchise conditions as Adonis is supposed to be angry at the running down of the catering facilities.

Bowker's had a great career, hasn't he. F**ked up Operation Princess at Virgin, screwed up so badly at the SRA the government abolished it, and now this on his watch at NatEx, taking a once very profitable company towards bankruptcy and very close to being eaten up by rivals.

[andel]

All that, and he gets paid too...

What a pratt he is.

[EXTspotter]

I am going to say this; Whatever happens, when it is passed back into private sector, I would be suprised if it wasn't named First (Great Northern/East Coast/North Eastern Trains...)