23 February 2009

A curt response

With the possibility of National Express handing back its East Coast franchise in the worse-case scenario, as calculated by City analyst JP Morgan, Sir Richard Branson has stepped forward with an indication that his Virgin Group would like the opportunity to have a stab at running trains there.

Said the Bearded One: "There are clearly franchises facing financial difficulty and we are absolutely committed to bidding for new opportunities. Virgin Trains made a sensible and realistic bid for the East Coast [franchise] in 2007 but we were not chosen. We believe we have ideas and experience that would make the East Coast as successful as our West Coast business now is."

A National Express East Coast (NXEC) spokeswoman retorted: "Given that Virgin West Coast is now rooted to the bottom of the long-distance train timekeeping league, we shiver at the very thought of Richard Branson bringing his own unique version of 'success' to the East Coast. We run Britain's premier long-distance railway and we intend to keep it that way."

While the nation's media has chosen to emphasise the nadir outcome for NXEC, I think that we ought to reproduce the potential zenith outcome, as too printed in JP Morgan's analysis:

The NXEC franchise "might be a high risk, but potentially high reward stock", should the slowed growth be priced into NXEC's current figures. "[NXEC] might be able to renegotiate the ICEP [Intercity Express Project] rail contract from a position of strength", so far from that company being one of the first to leave, they could actually come through the recession better-placed than other train operating companies.

Only RAIL has reported this potential outcome, which is staggering when you consider the number of reports that have been printed to the absolute contrary. Believe what you will, but simply be aware that both outcomes have been identified and forecast by JP Morgan.

Meanwhile, in an unprecidented move Brian Souter, Stagecoach's Chief Executive, is to take personal control of their South West Trains franchise. JP Morgan didn't see that one coming! (GL)