The “R” word has made a reappearance in rail travel: that’s R as in Renationalisation, following the Government takeover of the running of what used to be called InterCity East Coast (ICEC). Until yesterday, this franchise – to run trains out of London’s Kings Cross terminus to Leeds, York, Newcastle, Edinburgh and points north – was part of the National Express empire. Or so it appeared.
Much recent talk has been devoted to the idea that, should a company lose one franchise, they will forfeit any others they hold. This idea went the rounds when FirstGroup was having initial problems – and experiencing much customer dissatisfaction – with the enlarged Great Western franchise. But NatEx hold two other franchises – East Anglia and C2C – and they appear to be holding on to those. How does that work?
A clue can be gleaned from the Beeb’s Robert Peston, who has added an interesting post to his blog. It seems that National Express East Coast (NXEC) is a Special Purpose Vehicle (SPV) with a limited connection to the National Express Group. That connection is so tenuous that NatEx has been told by its legal advisors that the Government can’t call in those other franchises, even if NatEx walks away from this one. Andrew Adonis isn’t too sure about that, but if he wants to pursue matters, it will have to go to law. That’ll be extra.
So what happens now? The Government reckons that it will soon be able to put ICEC out to tender once more. But whether anyone will even come near the premium payment of 1.4 billions over the lifetime of the franchise – which was what NatEx bid – is another matter. At that time, franchises were looked on as a one way bet, and the winning bid was predicated on a revenue growth of 9% - every year.
Also, Stagecoach – who are the incumbents at South West Trains (SWT) are making unhappy sounds about the terms of their agreement with the Government. They, too, have signed up for large premia over the coming years.
So the number of unwanted franchises may be set to increase.