So is that the bottom line? Stagecoach could not get enough profit from a two-year deal?
Steve Stewart, the group’s director of communications, chooses his words carefully: “Why were the talks disappointing? There was a significant difference between ourselves and the Department for Transport in terms of the financial evaluation of our proposals.
“This is one of the most complex franchises in the country. And in the next few years a lot is going on in terms of capacity enhancement, in terms of infrastructure around Waterloo to add platforms. And there is the introduction of the new trains that we have procured.
“It needs a lot of management experience to run it, and we have built that experience over 20 years - we have been the incumbent since privatisation. In that time, passenger numbers have more than doubled.”
Stagecoach started initial negotiations for the two-year deal two years ago. The discussions have therefore already lasted as long as the franchise was intended to be in place.
When those talks began, the massive work at Waterloo was not yet agreed, and the extra rolling stock had not been ordered. So what Stagecoach considered an attractive proposition then would not necessarily be so attractive today.
Less than a month before the announcement, Stagecoach and Network Rail had announced their divorce - or at least their separation by mutual consent - after a marriage lasting three years. Their “Deep Alliance”, in which a single management team operated tracks and trains out of Waterloo, had fallen apart… to the disappointment of both parties.
SWT Managing Director Tim Shoveller has returned to managing just the trains, and Network Rail has put a new route management team in place. But the couple retains joint custody of the child - the joint control room at Waterloo remains.
Stewart insists that the split was unrelated to the failure to secure a new franchise. Insiders said it had more to do with Network Rail’s failure to devolve power sufficiently to individual routes - a centralised infrastructure was at odds with Stagecoach’s desire for a local partnership taking local decisions.
But a senior rail industry source with first-hand knowledge commented: “Train companies can be seen by the Department as too successful. Stagecoach has had a good run recently, getting East Coast.
“I wonder if Stagecoach Group might have been tarred by the collapse of the Deep Alliance with Network Rail. It was very much seen as the great hope for the future. If I were in the Stagecoach commercial team, I’d have been temped to think I had the DfT over a barrel, and played tough. But now they have lost their unique selling point.
“It’s not as if there aren’t other capable managers available - FirstGroup understands new rolling stock and National Express is hungry, and both need franchises more badly than Stagecoach.”
The RMT union - predictably - seized gleefully on the Government announcement as further evidence of the failure of the privatised railway.
“For some time now we have been told that DfT would be agreeing a Direct Award with SWT,” said General Secretary Mick Cash. “But now this has been abandoned, and the chaos and confusion over rail franchising that was a permanent feature of the last Government is continuing only months after the election.
“It is also a shocking indictment of Government policy that a company that has been running the franchise for 20 years has not been entrusted with the service going forward. That speaks volumes.”
The new franchise will start while South West Trains is in the middle of great upheaval. Christian Roth, the company’s engineering director, has described it as delivering the same capacity improvements as Thameslink for a tenth of the cost and in a quarter of the time.
The alterations at Waterloo International are due for completion in late 2017. When the suburban platforms 1-4 are rebuilt, they will handle 20 ten-car trains an hour, compared with today’s 17 eight-car trains. When? Summer 2017.
The 30 new five-car Siemens Desiro City Class 707 EMUs, which offer 20% higher capacity than today’s Class 450 Desiros, are now under construction. When do they enter service? Between July 2017 and January 2018.
Spot a theme? If Stagecoach loses this franchise to a rival operator, this will be a very messy handover. Traditionally the incoming boss dumps the previous executive team as he walks through the door, but here a new managing director would be walking into a building site that he had no hand in planning.
To introduce a little frisson for the new boss, the Class 707s have been built with Driver Only Operation in mind. SWT has made it clear that guards will remain, but would others do the same?
The overwhelming challenge for the new franchise will concern overcrowding. Passenger numbers into Waterloo will continue to grow at around 7% a year for the foreseeable future. Grand plans for Crossrail 2 will eventually help… but not in the medium term.
The already committed work at Waterloo will help boost peak-time capacity by nearly a third. But by the end of the next franchise, that still will not be enough.
With this in mind, Shoveller has been openly considering the idea of double-deck commuter trains for outer suburban peak services.
Network Rail’s draft Wessex Route Study says that double-deck trains may address the capacity gap beyond 2019 on main line long-distance services. But it also suggests that no double-deck vehicles in use today in other countries would be suitable for SWT. So a new design of EMU would be required.
The study says 26-metre vehicles with doors at the vehicle ends would provide a 50% increase in floor area compared with today’s Class 444 Desiros. They could operate from as far out as Southampton. But a small fleet of bespoke rolling stock would come at a price - something that could dissuade budget-conscious franchise bidders.