01 July 2009

But what about Lincoln?

I, and anyone else who watched Tuesday evening’s BBC News at Ten, knew that National Express (NX) was very likely to default on its East Coast rail franchise yesterday morning. Newsreader Huw Edwards brought us all some breaking news at 2217 precisely, stating that NX’s chief executive Richard Bowker had issued his resignation.

Chief exec’s more-often-than-not jump before they’re pushed and with Bowker jumping, something big had to follow. It came as the London Stock Exchange opened for business yesterday, with the Department for Transport (DfT) and NX issuing statements to the effect that the East Coast rail franchise would be taken on by the government later this year until at least the end of 2010. NX had been in negotiation with the DfT to re-negotiate the East Coast franchise but the DfT chose not to budge and thus NX chose to pull out of its operation.

There appears to be some discussion as to whether or not the DfT is able to also take-back NX’s other two rail franchises: c2c, operating between Southend and London Fenchurch Street via two routes and East Anglia, (NXEA) operating throughout that area of England. As I understand it, if a train operating company (TOC) “hands back the keys” (- the much-used phrase of yesterday) on one franchise, they must also default on *all* their rail commitments.

In the BBC’s 1 o’ clock news yesterday afternoon, NX were quoted as saying that the DfT was “not allowed” to relieve it of c2c and NXEA. The DfT may have other ideas; it ultimately comes down to the precise way NX handed-back NXEC. It may have been done in a manner that sees it not being technically classed as a default, in the terms of its operation, in which case then perhaps NXEA and c2c will remain in the hands of NX. Additionally, having to re-nationalise a further two rail franchises is the last thing the Labour government wants right now.

The livery was fresh and striking. I preferred it GNER's more traditional red and Riviera blue.

NX were also keen to point out that they would be more than happy to operate the East Coast franchise when the recession ends. This seems to have incensed Transport Secretary Lord Adonis who, yesterday in a statement to the House of Lords, vented his anger at NX by telling his Lordships that it is “wholly unacceptable” that TOCs should reap the benefits of rail franchises when times are good but default on payments when times are bad.”

But what of Lincoln? In February, the Office of Rail Regulation, following discussion with the DfT and other TOCs, gave NXEC the go-ahead to operate six return journeys between London King’s Cross and Lincoln Central stations, with the option of at least one daily extension to either Grimsby Town or Cleethorpes. How will this fair now? Will the planned new journeys commence in December as had been provisionally planned? If not, will the new, nationalised East Coast company choose to operate them? We think the answer to both questions will, unfortunately, be no.

Neither of these trains would've ever operated to Lincoln; NXEC were to deploy 125mph Class 180 'Adelantes' on the forthcoming service.

We have two very well-placed sources within NXEC (one of whom is a member of the LEYTR), and after a couple of frantic emails yesterday afternoon, the response to our Lincoln-based query was “To be honest, no one has a clue right now”. Perhaps it’s best to let things settle. NX are to continue operating the East Coast franchise until a pre-determined date later this year (when a £40m under-written loan from the DfT expires), so matters are too ‘up in the air’ for the time-being.

It’s a shame that NXEC will soon be no more. Having travelled countless times aboard the same franchise when operated by the now defunct GNER (whose demise was virtually identical to NX’s – they bid, or rather Sea Containers, GNER’s parent company – far too high for the prestigious route), NXEC seemed to have handled the transition period well and initially improved facilities for first-class passengers. Not everyone has been enamored by NXEC though.

A cracking shot of a Dundee-bound HST crossing the Tay Bridge.

The national press has chosen not to get bogged down with the minutiae of why NX has effectively defaulted; just as well, really! It’s rather surreal on the surface: passenger numbers continue to *grow* and net profit from fares also continues to *grow*, too. But, neither is growing at anywhere near the rate NX envisaged when it negotiated with the DfT for the East Coast franchise two years ago, commencing operation on 9 December 2007. There was no sign on a ‘thumping recession’ looming then and NX faced some fearsome competition, too, with bidders including First, Arriva and InterCity Railways - the latter being a consortium comprising Virgin, Stagecoach and GNER.

NX’s winning bid of £1.4 billion was more than that GNER bid two years earlier (£1.3 billion) and it had to default as it bid too high; NX had no extension to the franchise so effectively bid £0.5 billion more for a franchise that had two years less to run.

One of NXEC's strengths was its online presence. Its website is absolutely superb - based on a design that many other operators now employ.

On the subject of Virgin, old ‘Beardie’ will be rubbing his hands together right now. He’s not hidden his desire to get his hands on the East Coast franchise, which would result in Virgin Trains having the exclusivity of operating both Anglo-Scottish rail lines. Now if this were the bus industry and if Virgin was 100% Stagecoach (the latter has a 49% stake in the former), the Office of Fair Trading would have much to say about that, and so too would the Competition Commission. It would be interesting to see if the rail industry is any different! (GL)

We'll leave the last word to 'Prezza' though: