Open access under a new government

The Conservative Government has approved new open access operators. Labour says it will retain the concept if it wins the General Election. Paul Clifton hears from current and prospective operators.

“Open Access is fairly ‘Marmite’ within the industry,” explains veteran advocate Ian Yeowart.

He founded Grand Central in 1999 and plans to launch two new routes in 2025.

“There are people who would rather see a very straightforward clockface timetable, convinced it would attract new customers to the network,” he adds.

“There’s no evidence to show that. An operationally led railway is not necessarily a good railway for passengers. They are driven mostly by price, and competition is good for that.”

It’s an observation borne out by others in the big concessions. Open Access folk get in the way, soak up capacity, reduce timetable flexibility, and poach passengers… according to those who don’t run them.

But these niche markets work. They are popular, packed and profitable, selling seats at competitive prices and priding themselves on better customer service than their larger rivals.

“Competition delivers choice for passengers and drives up standards, which is why we continue to make the most of Open Access rail,” says outgoing Rail Minister Huw Merriman.

Labour’s policy document states that Open Access “will remain where it adds value and capacity to the network”. It adds that future applications will be decided “on the basis of an updated framework and guidance issued by the Secretary of State”.

That doesn’t quite answer the question: will they be a cure or a curse on a less-fragmented future railway?

“We need to work with Labour to better understand its policy document,” says Arriva Managing Director UK Trains David Brown, diplomatically.

“It supports Open Access where capacity is available and where it adds value. We need transparency about the tests that will determine those things.”

But Lumo, Hull Trains and Grand Central can feel more secure, even as their parent companies - FirstGroup and Arriva - face removal from their much larger concessions under a Labour government.

“I think the present significant support for Open Access will probably water down if there is a change of government,” says Yeowart.

“But I think it will still be there. We are a very London-centric society. The outlying towns and cities that don’t have direct services to London feel it acutely. When one is offered, it is very quickly important to them.

“Open Access generally serves these Labour heartlands a long way from London. The government sees it is doing no harm to the system - passengers like it. We get approached by MPs of various parties asking if they could have a train service. If only it was that simple!”

Martijn Gilbert, managing director of both Lumo and Hull Trains, notes: “It is not an accident that the East Coast Main Line is the only route that has not just recovered since the pandemic, but increased passenger numbers.

“That includes publicly owned LNER. Even with the addition of Lumo, there has been very healthy growth on the subsidised operator. The right sort of Open Access clearly does benefit the whole railway.”

What do existing operators need?

“The number one requirement is that the infrastructure is reliable,” says Gilbert.

“Network Rail has faced unprecedented challenges. For us to be successful, we need Network Rail to be successful.

“That is down to government. Whatever Great British Railways looks like, it must enhance the right behaviours.”

Labour has been won over. Although the detail remains unclear, it has accepted the concept of Open Access.

And the Conservative Government has wanted more, backing the launch of three new services in the next two years - Stirling, Carmarthen and Wrexham to London. Plus, Lumo (London-Edinburgh) is expected to extend to Glasgow.

“Open Access provides excellent customer service, offers value for money, and uses capacity to connect places that would not otherwise be connected by national rail contracts,” says David Brown, whose Grand Central is a tiny part of Arriva’s rail portfolio.

“We see that in our operations across Europe, where there has been quite an expansion of Open Access competing against publicly provided services.

“The first thing we want is greater clarity on precisely what tests are being used to secure Open Access applications. We need to know the priorities and objectives - what is needed for an application to be successful.

“The second ask is for greater clarity from Network Rail or its successor on what capacity is available for use. It is often difficult for us to see what paths are possible.

“The third ask is about greater speed of decision-making. It can take a very long time to get an Open Access agreement, and that makes it difficult for us to form an investment case.

“And on any application that is granted, it needs to be for long enough to secure investment in trains. We need a good run at it.”

At Lumo, Martijn Gilbert is keen to ensure that future extra capacity on East Coast is allocated in a fair manner.

Lumo is the first operator to pay an additional level of track access, known as the ‘infrastructure investment charge’. It pays more per passenger than the contracted Department for Transport operator.

“Key to this is the Regulator being appropriately structured,” he cautions.

“The Labour document suggests the draft Bill from the Conservatives could be taken forward without too many changes, and we are pleased about that.

“We have moved a long way from the days when people claimed it was just about abstracting passengers and revenue. Most people are on Advance purchase fares for a specific train. That changes revenue allocation. It means fact-based decisions rather than relying on perceptions from the past.

“We need the right enabling legislation. If you are adding paths on a route, why would the default position be to give them to operators that need subsidy?

“We are applying to run to Sheffield. We are at the final stage of agreeing to extend to Glasgow. Lumo is focusing on modal shift from air to rail. It’s a lean, mean, development machine that is not wrapped up in the bureaucracy of committees and complicated structures.”

Open Access operators nearly always top the customer satisfaction tables. Lumo sits at 96%.

“At no cost to the taxpayer,” Gilbert reminds.

“You could say we’ve done a bit of levelling-up. Hull had one train a day to London. It now has eight. Hull University will tell you it has had a 45% increase in applications from international students. Hull was European City of Culture in 2017. These would not have been possible without a decent train service.”

Arriva’s David Brown underlines the point: “Grand Central reaches places other operators don’t. Sunderland to London is a big market for us. LNER is withdrawing its service because of low passenger numbers. That’s probably because all the passengers are on our trains! We bring value to communities.

“We put in a lot of money to Grand Central during COVID, when we received no government support apart from furlough. We did that because it makes a profit for us in better times. It may be that there is a greater role for Open Access to fill gaps that the big contracts aren’t filling.”

Yeowart adds: “There is no evidence to show there is any abstraction once the services have settled. If there was, LNER would not be doing as well as it is.

“Competition on the main flows, as Lumo has shown, drives up revenue. There were 33 trains a day to London from York when Grand Central appeared. That was 30 plus our three. There are now 48. So, Open Access has not led to the big franchise reducing its services.

“I used to be the manager of the travel centre at York in the early 1990s. You can buy a ticket to London now that is cheaper, in real terms, than it was then. And East Coast has by far the best customer service across the country. That is because of competition.

“York is prosperous compared with Sunderland and Hartlepool. But it’s easy to forget that, within that, there are people for whom £10 spare at the end of the week is a significant amount of money. Bringing travel opportunity to those people matters.

“If you can’t afford the train, it doesn’t matter what time the train runs. It’s not the timetable that drives people towards the trains; it’s cost that is key. The current government believes that we will drive the market through competition, and I am a free marketeer.

“What we need is stability. The ORR [Office of Rail and Road] has always done things through evolution, not revolution. We want that to continue.”

Yeowart points out that “the ORR is independent. Transport Secretary Mark Harper cannot pick up the phone to John Larkinson [ORR chief executive] and call for a service. I don’t think the process will change much when GBR comes along. It will take a few years.”

The parent group of Hull Trains and Lumo could soon get a dose of its own medicine. Having intruded on East Coast for 24 years, FirstGroup’s Great Western Railway is due to face first-time competition on the Great Western from Yeowart’s Grand Union service, running from Carmarthen to Cardiff, Newport and London Paddington.

“I’ll discuss that from the perspective of Hull Trains and Lumo,” says Gilbert carefully.

“Be clear that the financial case for this sits with the Department for Transport. It’s not for GWR or FirstGroup to be the decision-maker on this, given the way contracts are structured. It’s the government’s revenue risk.

“But from our experience, there has been a substantial shift in the way the market is behaving. On East Coast there is huge growth in leisure travel, and that is fuelled by additional choice and services.

“Drill down to station level. Newcastle and Leeds are similar-size markets. Newcastle has choice with Lumo; Leeds doesn’t. The difference in recovery between the cities is large. I would say Lumo has proved beneficial to everybody, and we should be bolder and braver as an industry about where this leads.

“A future government should encourage more of it, positively embraced and less feared, as something that can play its part in the wider railway mix that drives innovation and keeps fares good value.”

Brown contends: “We are building a case on Grand Central to extend the access rights. That will involve better trains. Labour sees contracts that expire going back into public control. For us, on Chiltern and CrossCountry, that is a little way away because we have reasonably long contracts.

“But in a reformed industry, we want a speedier process for what is very clearly required.

“Customers like Open Access because of the great service. That’s why the trains are full.

Other parts of the industry see it as a bit of a nuisance. But that’s why we have a System Operator and a set of rules on bidding for paths, isn’t it?

“We have to put customer requirements at the centre of this. The Open Access operators are popular and successful. Any new government needs to reflect that in the processes it puts in place.”

What do new operators want?

Open Access has never had it so good. Existing operators are now thriving, and the door has been opened for more.

Each seeks to exploit what it identifies as a gap in the market.

Grand Union Trains plans services from Stirling to Euston (skirting past Glasgow) and from Carmarthen to Paddington (bypassing Swansea). More could follow.

Plus, new entrant Alstom has resurrected the old idea of Wrexham to London, but this time bypassing Birmingham New Street and then along the congested West Coast Main Line to Euston, whereas a previous attempt ran to Marylebone.

“We hope we can introduce Carmarthen in the second half of next year,” says Yeowart.

“There are a huge number of coach trips between Cardiff and London, compared with anywhere else in the country. That is price-driven - the trains are expensive. We want to bite into some of that market.

“We wanted new-build trains, but we have been caught up in issues at Hitachi, where deliveries are delayed.

“Now there are off-lease diesels that we could access, so we are looking closely at Class 222s, which are very reliable. And there are some Class 180s. These are mid-life trains.

“And for Stirling, which would run under the wires all the way. Carmarthen is also under the wires a lot of the way. It would allow us to build the customer base while the new-build situation stabilises.

“We’ve spoken to the politicians and explained why we will have to start with diesel, because there are no suitable off-lease bi-modes or electric trains. The feedback is that they just want to see services started.

“We are also looking to a Cardiff-Edinburgh service. Five or six trains a day. We know the route is under-served.

“But there has not been an Open Access application which seeks to address overcrowding, which this would do on the core. There would be benefits each end, especially west of Gloucester. But it would introduce a lot of additional seats through the core.”

How likely is that to happen?

“We have a 50% success rate with our Open Access applications, which we think is good.

“We tend to look at rail as being exactly the same everywhere. It isn’t. On road, we understand that local buses and long-distance coaches are completely different markets.

“Local rail services should be run locally, for the benefit of the local economy. Inter-city services should benefit from competition.”

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