RAIL 824: Run that by me again…?!

It was hard not to feel a pang of sentiment at the loss of the South West Trains franchise by Stagecoach. Over the past 21 years it has done a good job with Britain’s busiest railway, which is extremely difficult to run. First MTR will discover that soon enough!

So I must start with a wave of acknowledgment and a sincere word of thanks and appreciation to Stagecoach and its staff, for more than two decades of solid achievement. They were by no means alone in having a very rocky start (too few drivers!) in passenger train operations back in 1996, when they ran the very first train of the newly privatised era. But they quickly ‘got on top of the job’, and since then have set many benchmarks for top-quality service - including winning the prestigious Passenger Operator of the Year Award at RAIL’s National Rail Awards - the railway ‘Oscars’ - in both 2005 and 2011. 

SWT doubled passenger numbers to 230 million a year and replaced slam-door stock with a £1 billion new fleet. The company was always open, easy to deal with and engaged willingly with my team, through good and less-good times alike. Thankyou one and all.

First MTR has a tough act to follow (it is always hard following a success into any job, either individually or corporately), and expectations will be high. This is not merely because of the everyday toughness of the SWT service, nor even because of the fact that Waterloo will be a building site when they take over, but also because the bid promises as reported by Paul Clifton (pages 6-9) are sweeping, bold and will be extremely demanding. Full details - and an explanation of why their commitments will add further to both expectation and challenge - are on our news pages. 

First MTR will certainly have their work cut out, notwithstanding that First is a highly experienced UK passenger operator while MTR is expert in intense metro services in Hong Kong.  I wish them well and look forward to working with them in times to come. They have promised premium payments of £2.6bn over seven years, and £80 million of investment will be directly funded by First MTR.

The franchise contains lots of eye-catching passenger benefits, one of the most useful (and long overdue) of which is a season ticket for folk who only need to travel maybe three days a week. Changing work patterns demand this, but the railway and the Department for Transport have been lamentably slow in introducing it. Likewise, carnets of value tickets to use as you please - such is the fear at the DfT of better passenger value driving revenues down!  

There’s plenty to observe, enjoy and put under RAIL’s microscope (but hopefully not in our cross-hairs!) as the new franchise gets under way. Do stay with us and find out!

But behind the headlines, utter madness lies. As we also report on pages 6-7,  30 new five-car Siemens Class 707 EMUs financed by Angel Trains and costing more than £200m will be withdrawn in 2019 after less than two years’ service, in favour of new trains. These 30-year lifespan assets - some of which are not yet even built - will face an uphill struggle in the search for a new home, otherwise storage or scrapping will be their fate. 

As if this isn’t jaw-dropping enough, Derby-based rolling stock leasing company Porterbrook faces even worse problems - no fewer than 592 of its vehicles, in three Classes (‘455’, ‘456’ and ‘458’) face the same fate as Angel’s 150 new and as-yet mainly unbuilt cars. They will be withdrawn, also in favour of new trains. 

Yes, the Porterbrook trains are older, but as we report in news many have been (or are being) refurbished at the behest of the DfT, whose franchise decision has now stripped away their reason for existence. 

It’s a rum do indeed - the cost of upgrading the ‘458s’ alone was £42m! Try explaining this on the Brigg line, for example, where a Saturdays-only service using Pacers is in dire need of upgrade. There are many such places  where passengers will be open-mouthed with shock at what they will see as unforgivable waste.

To drive your eyebrows quizzically yet higher, at the same time First MTR is also taking 18 five-car ‘Plastic Pig’ Class 442s out of storage, to use on its Portsmouth service. These trains were built by BR in the 1980s and were replaced with new Siemens trains by Stagecoach fully ten years ago - all at the same time as new and unbuilt trains are going for scrap! FirstGroup Chief Executive Tim O’Toole says their ‘refurb’ means they will be indistinguishable from new trains. 

Cheaper finance is largely responsible for making new trains currently less expensive than previously ordered but as-yet unbuilt trains - logic dictates that this can only be a short-term aberration. Yet it has nonetheless enabled First MTR to offer a better bid in which new trains can be offered more cheaply than identical trains, some of which are as yet incomplete, after only two years.

What makes the situation even more bizarre is that if Siemens wins the First MTR order then the newer trains might be identical to the previously ordered vehicles which will be out of service within two years! You really couldn’t make it up.

It is right that the ROSCOs should bear risk and occasional setbacks - that’s the way of the market. I have heard it said that this is all perfectly normal market behaviour and that, finally, we have a genuine market in trains because of the ‘liquidity’ which the rolling stock surplus has produced. 

But that’s only half true. If that really was the case, then market forces would have led Angel into lowering its prices to create a yet better deal in order to avoid precisely this situation. In other words, it would have cut its prices in order to beat the First MTR offer and thereby secure the business. 

That clearly hasn’t happened, so what’s wrong with our system that neutralises this most basic of market functions? It’s not a market when basic supply and demand cannot work to set a price. I’d like to give you answers, but no one’s talking.

It is worth remembering what Rail Minister Claire Perry said in 2014, when Angel placed the £210m order for the 150 cars which now have just two years’ work with SWT.  

“More passengers are travelling on our railways than ever before and to meet the demand for extra seats and services over £38 billion will be spent on the railways during the next five years. This latest new train deal is proof not only of our determination to transform Britain’s railways but also the industry’s commitment to deliver a better journey for Britain’s passengers.”

Yes, Government must make the best deals that it can. And yes, the ROSCOs must accept risk. But this bizarre outcome will test investor commitment to the limit, with the consequence that short-term cheaper trains now may well mean more expensive trains in the future. Furthermore, don’t expect that passengers desperate to see new trains will understand any of this.

Comment: RAIL 824: April 12 2017 - April 25 2017

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