From poisoned chalice to Holy Grail?

 “They were desperate to get the contract because they were losing a lot of their franchises,” recalls Schmid. At the time, National Express had lost Midland Mainline, Gatwick Express and Silverlink, and spent a reported £23m in its attempts to retain or win new franchises.

National Express East Coast (NXEC) planned to increase capacity, with up to 25 extra services each weekday from December 2010 and a direct London-Lincoln train at two-hourly intervals. There was no mention of any new trains, but there was the reinstating of stored ex-Virgin West Coast Mk 3 coaches.

But the win came with a rather hefty figure of £1.4bn of payments to the Government over the seven and a half-year franchise, which even the DfT classed as ‘medium risk’, it later transpired.

“They were banking very heavily on the delay payments from Network Rail,” said Schmid. “A significant proportion of their income was based on Network Rail’s performance being poor, so when Network Rail was performing much better, their revenue stream was not as good. But they still had a very ambitious payment promise.”

Very soon, it became apparent that this wasn’t going to be the Inter City East Coast franchise’s new golden age.

“It was never the service that GNER had provided,” says Preston. “It was pretending to trade on past glories and just wasn’t delivering. That was when we had the slow demise of the restaurant car. It wasn’t quite the same.”

The introduction of a £2.50 charge per journey for seat reservations seemed indicative of the company’s desperation to gain income through whatever means it could. By 2009, against the backdrop of the economic downturn, increasing fuel prices and ticket sales actually falling by 1% in the first half of the year, NXEC was facing a cash crisis - exacerbated by parent company National Express deciding that it would not provide any further financial support to the operator.

And so Andrew Adonis, the Secretary of State for Transport, as the operator of last resort under the Railways Act, placed the Inter City East Coast franchise under the control of Directly Operated Railways - a shell company set up by the DfT. The franchise was renamed East Coast and started operation in November 2009.

Many saw this to be the start of a return of nationalisation, but even with a Labour government in charge, the ‘n’ word was never used.

Says Schmid: “It wasn’t nationalisation, it was basically a limited company running the operation on behalf of the government, and the profits of that business would go back to the government. But they no longer had a target to match, they just delivered whatever they made.”

The changing of logos to the new name of East Coast and the removal of the hated £2.50 reservation fee were the most obvious first moves, but the major changes came with the introduction of a new timetable in May 2011 - the biggest on the ECML for more than 20 years. This included the introduction of a direct London-Lincoln service (promised by NXEC but never delivered), although only one train per day each way.

Enthusiasts welcomed the return of locomotive namings, and East Coast won praise for its special livery wraps, but in the case of punctuality the ‘nationalised’ operator’s performance has been very patchy. Although enjoying a slight increase in punctuality over the corresponding period 12 months earlier, East Coast ran 81% of its services on time from November 9-December 6 2014 - making it joint second to bottom in the punctuality tables.

Schmid is fairly dismissive of East Coast’s reign: “They basically ran the operation well, but they haven’t been particularly innovative.” 

With musings from Labour that it would keep East Coast in “public ownership”, the coalition moved the ICEC franchise to the top of the queue, and invited bids in March 2013.

In January 2014, the DfT announced a shortlist of FirstGroup, Keolis/Eurostar and Stagecoach/Virgin for the new franchise, with the award to the Stagecoach/Virgin consortium coming in November 2014.

So at the third attempt, Richard Branson will finally get his Virgin branding on trains running from King’s Cross - albeit as a minority partner in the new operator.

Finally, the Inter City East Coast franchise will definitely have new trains - the new Class 800/801 units that will join the ECML from 2018. These will enable new destinations to be served - Huddersfield, Sunderland, Middlesbrough and Dewsbury are all mentioned, with Lincoln and Harrogate in line for more services.

Preston reckons that the news of more through services will really benefit passengers: “This brings me back to the findings of some research we did at the RPC about rail-heading. We discovered that two-thirds of the passengers travelling long-distance from Darlington station lived closer to another station, but would rather drive to Darlington for a direct service than trust a Pacer on a connecting service from their nearer station.”

But surely the big question is: given that two private operators have already failed to make the ICEC franchise work, will the Stagecoach/Virgin consortium meet the same fate? Schmid thinks that unlikely, despite the large £3.3bn payments promised.

“If you look at the way Virgin and FirstGroup bid for West Coast, FirstGroup made a completely unreasonable and untenable promise; Virgin’s was very realistic.

“I am quietly confident because they will not have made big assumptions about revenue to be gained from Network Rail, and although the leasing charges will be more for the new rolling stock, Hitachi is providing the trains on a very clear, full maintenance basis, so Virgin will know exactly what it will have to pay for the next 27 years. I suspect that Virgin and Stagecoach together would not be adventurous. Ambitious, but not adventurous.”

After the West Coast franchise debacle, Branson wrote on his blog: “We also did not want to risk letting everybody down with almost certain bankruptcy at some time during the franchise, as happened to GNER and National Express who overbid on the East Coast Main Line.”

Passengers hope it will be a case of third time lucky for the private operator of the Inter City East Coast franchise.

• This feature was published in RAIL 765 onJanuary 7 2015