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National Express East Coast line hits
the franchise buffers
James Irvine
Editor: www.land-care.org.uk
Filed 02 Jul 09
©www.land-care.org.uk
National Express could no longer meet the financial commitments of its franchise to run the East Coast train service between Edinburgh and London. National Express was losing money. It based its strategy in paying top dollar for the franchise on a predicted growth rate of 10% per year. But in the event growth is currently only 1%.
The route is the busiest in the country with the highest fares. It is alleged that the substantial profits from the route were being used to compensate for losses elsewhere in the Company. Efforts by National Express to renegotiate contract terms with the government's Department of Transport failed.
Today, the company threw in the towel. Its chief executive, Richard Bowker, resigned to take up another rail job job in the Middle East.
A National Express train at Waverly Station, Edinburgh taking on passengers bound
for Kings Cross London on the day the company's franchise was
taken back by the Government.
(Photo©Kimpton Graphics)
Lord Adonis, Secretary of State for Transport, announced that the East Coast line would be run by his Department with no change in the service or the staff. There would be no limit to the money available to keep the service unaffected. He declared that his intention was that the franchise would be sold at a profit to another company within one year. He based his optimism on the strong performance of rail franchises in the south of England, to and from London. However, not all economists agree. They warn that the economic downturn, which may affect Scotland more than the South East, may further limit the growth of rail travel on the East Coast line. Also, one has to wonder if the Government is a competent body to run a major commercial business.
I had a word with the driver of the impressively long snake-of-train as it silently paused at Waverly. Far from being bothered about the situation, he was highly delighted. But it was not nationalisation that pleased him, but that a better company would win the new franchise. In his view National Express had no idea of how to run trains: they knew about buses, not trains.
He was in no doubt that he wanted GNER to take over as soon as possible. "They are a good company to work for," he said. GNER used to run the trains on the East Coast route before National Express out bid them at the last franchise auction.
Lord Adonis is essentially a political historian with a successful career in journalism. He does not appear to have any knowledge as to how to run a business. Not being elected as an MP, presumably he had to be made a Lord and dress up in ermine for him to be able to be a Secretary of State and join the Cabinet. Indeed, there has been rather a lot of that of late.
Expensive legal battles between the Department of Transport and National Express are likely. The Government are going to have a conflict of interest: between making a profit out of their most recent nationalisation, and encouraging people to leave their cars behind. A First Class fare of £373 return is a lot to sting the would-be business traveller who does not have the luxury of being able to book a month in advance.
Allegedly, all has not been well in terms of the performance of the support staff employed by National Express trains. Will Nationalised Express be good at sorting this out, or will there be strife?
As a result of this debacle, it is likely that the national debt will rise, and not fall as hyped by Lord Adonis.
Yet again, the Chief Executive of a company who has botched up, simply walks off to another lucrative job. Think of Hornby (the former HBOS chairman, not the super model trains). Having been key in the mismanagement of HBOS, he now heads off to be head of Boots the Chemist. What a chief of ASDA was doing in a Bank is beyond belief. So who is going to run the prize East Coast trains?
But the problem may be much deeper than that. The structure of the franchise contracts has led the government into a deep financial hole, so casually bluffed over by Lord Adonis when asked to comment on BBC TV Breakfast on the day of the nationalisation.
©www.land-care.org.uk
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