It was a done deal. That’s what everyone thought. It was even on the Government’s published Rail Franchise Schedule last October.
Stagecoach would be handed a two-year contract to keep on running South West Trains. The company would guide one of the UK’s most complex franchises through the upheaval caused by closing four platforms at Waterloo to make them longer, by shunting services into the long-redundant international station alongside. Stable management would minimise the impact - the people in charge would know all the potential pitfalls.
Wrong! Instead, halfway through ripping Britain’s busiest railway terminus to shreds and reconstructing the constricted station throat, there is every chance that the management team will be ripped out, too.
Without passing comment on today’s team, is that really such a clever idea?
In the place of a short Direct Award, there will be an open competition for a longer-term franchise. And as South West Trains carries 220 million of Britain’s most well-heeled commuters each year, expect every half decent train operator in Europe to sharpen its pencils for this one.
South West Trains makes money… lots of it. There is no subsidy, so the Government will expect every bidder’s balance sheet to show whopping premium payments, alongside a comprehensive agenda to ease overcrowding against a backdrop of rapid growth in passenger numbers.
“It has become clear that we are unable to reach agreement for the anticipated Direct Award,” wrote Secretary of State for Transport Patrick McLoughlin in a letter to stakeholders. He continued: “A franchise competition will ensure that passenger benefits are delivered beyond 2017 in a way that achieves best value for taxpayers, and will give us an exciting opportunity to plan services into the 2020s.”
Reading between the lines, McLoughlin clearly felt that Stagecoach was not offering him sufficient value for money. And presumably by a very wide margin, because operationally there is every reason to stick with the team led by the very well-respected Tim Shoveller during a period of upheaval.
Stagecoach thought it had offered a good deal. “Our Direct Award proposals sought to build on the extensive improvements delivered under our operation of the franchise since 1996, providing more benefits for customers, good value for taxpayers and an appropriate return for investors,” read the company statement.
Instead, the Government will merely take up its option of extending the current concession by six months from February to August 2017, before a new franchise starts.
The company statement concluded: “Stagecoach does not currently expect South West Trains to earn a significant profit during any extension period.” The share price promptly dipped by 2%.