How much are rail companies losing to delay repay with the current disruptions?

[thenorthern]

Twice in the past month I have got the train from Cumbria to Staffordshire and cancellations en route mean I miss the last connection so the railway company has to pay for a taxi to take me home which I think costs them about £40. I then claim delay repay as I normally arrive 2 hours late meaning that the railway company gets no revenue from me but has to fork our a lot for my journey.

Given how much disruption there is and I am not the only one claiming delay repay I was wondering how much is this costing the TOCs?

 

[Watershed]

It's not really costing the TOCs so much as the government, who underwrite all these costs.

And yes, the disruption over recent months certainly has come at a cost. But it's worth bearing in mind that overall, only a small proportion of journeys are delayed sufficiently to even make a claim. And of those, only a minority of passengers claim what they're entitled to.

 

[JamieL]

That's interesting to know. In which case, what financial consequence is there for TOCs when a service runs late or cancelled?

 

[Surreytraveller]

That's interesting to know. In which case, what financial consequence is there for TOCs when a service runs late or cancelled?

The money just goes round in circles. Network Rail/TOCs/Network Rail. The money doesn't really exist

 

[JamieL]

The money just goes round in circles. Network Rail/TOCs/Network Rail. The money doesn't really exist

The money seems to exist sufficiently to pour into the pockets of (e.g.) First Group shareholders.

 

[Watershed]

That's interesting to know. In which case, what financial consequence is there for TOCs when a service runs late or cancelled?

It will count against their performance metrics, so it will affect the level of performance fee they earn.

The money seems to exist sufficiently to pour into the pockets of (e.g.) First Group shareholders.

Yawn, this again? The profits on NRCs are tiny in the grand scheme of things. Yes, with the DfT pulling all the strings you have to wonder what the point of having private TOCs really is. But a ~2% profit margin is peanuts.

 

[Clarence Yard]

As the DfT is effectively paying for all costs and receiving all revenue now, the TOC “owners” are now just acting as the DfT’s managing agent.

For which they get paid a fee which has a base element and a performance related element. Performance is on all the aspects of the TOC, not just train performance.

As there is no “profit”, as such, anymore in running a TOC, the DfT have contractually banned any siphoning off of TOC monies to shareholders, apart from the fees.

It should also be remembered that owning groups, such as FG, run a range of activities, not just in rail and their profits and shareholder dividends will reflect total group performance, not just on their DfT TOCs.

So, in acting as the DfT’s agent, delay repay costs are now ultimately paid for by the DfT, not the TOC owners. What you knew as franchises can now never go bust - all the financial risk sits with the DfT, the Treasury and therefore us, as taxpayers.

 

[Andrew1395]

The money just goes round in circles. Network Rail/TOCs/Network Rail. The money doesn't really exist

It really does exist on the P&L. Network Rail really did post a £2billion profit in 2020/21. Thats why delay attribution is still keenly managed.

Freight and open access operators don’t get DfT bailouts (as far as I am aware - but I don’t follow it that closely).

And as explained, TOCs are virtually insulated from financial loss. A 2/3% margin on £10 billion passenger revenue is still more than enough for most transport groups to remain in the market. First rail profit was £112 million in 2021. As it said itself:- “First Rail's four management fee-based operations (which have no passenger revenue risk and limited cost risk) continue to deliver performance metrics in line with management expectations, and with our open access operations currently trading ahead of plan as a result of strong leisure demand, First Rail's performance in FY 2023 is expected to reflect a positive contribution from these businesses”

 

[Starmill]

The money seems to exist sufficiently to pour into the pockets of (e.g.) First Group shareholders.

First Group's business activities may well in general be providing some earnings, but UK rail? Really? Do you really think that they're earning anything substantial from the sector? Long term only Lumo has strong prospects, and they're too new to be making big earnings just yet.

 

[GordonT]

It will count against their performance metrics, so it will affect the level of performance fee they earn.


Yawn, this again? The profits on NRCs are tiny in the grand scheme of things. Yes, with the DfT pulling all the strings you have to wonder what the point of having private TOCs really is. But a ~2% profit margin is peanuts.

You do have to wonder, however, how Avanti's performance since winning the franchise from Virgin measures up to the promise of their bid. Also what would be more palatable for the franchise owners - being "stripped" of their franchise or being left to muddle along?

 

[Clarence Yard]

The promises of the original bid are irrelevant now. They are history.

What matters is performing against your EMA/ERMA/NRC terms and what the DfT tells you to do. If you do as you are told, the better the chance of earning that performance related part of the fee.

That’s where the real money is and that chance to earn a fat fee is what keeps the private sector interested in being the DfT’s management agent.

 

[Watershed]

You do have to wonder, however, how Avanti's performance since winning the franchise from Virgin measures up to the promise of their bid. Also what would be more palatable for the franchise owners - being "stripped" of their franchise or being left to muddle along?

As long as they are paid their management and performance fee, they will not be terribly concerned about the public image.

 

[thedbdiboy]

It's not really costing the TOCs so much as the government, who underwrite all these costs.

And yes, the disruption over recent months certainly has come at a cost. But it's worth bearing in mind that overall, only a small proportion of journeys are delayed sufficiently to even make a claim. And of those, only a minority of passengers claim what they're entitled to.

The money just goes round in circles. Network Rail/TOCs/Network Rail. The money doesn't really exist

As the DfT is effectively paying for all costs and receiving all revenue now, the TOC “owners” are now just acting as the DfT’s managing agent.

For which they get paid a fee which has a base element and a performance related element. Performance is on all the aspects of the TOC, not just train performance.

As there is no “profit”, as such, anymore in running a TOC, the DfT have contractually banned any siphoning off of TOC monies to shareholders, apart from the fees.

It should also be remembered that owning groups, such as FG, run a range of activities, not just in rail and their profits and shareholder dividends will reflect total group performance, not just on their DfT TOCs.

So, in acting as the DfT’s agent, delay repay costs are now ultimately paid for by the DfT, not the TOC owners. What you knew as franchises can now never go bust - all the financial risk sits with the DfT, the Treasury and therefore us, as taxpayers.

Delay Repay is real money, and is ultimately being paid by the taxpayer. I know lots of people are fans of this Government cashback scheme, but like furlough or any other handout it doesn't come for free. Even in the defunct franchise system, an awful lot of these supposed 'TOC' penalties were just being recycled back to the taxpayer. The worst thing was that due to any real lack of direct accountability, instead of incentivising better performance it just becomes another cost.

This gets us to the ludicrous situation whereby Avanti (for example) operates a service in meltdown and then ends up handing wads of fare income back to passengers. Does anyone think that that is better than actually running a decent service?

Then of course, when it finally dawns of DfT how it works, we get things like 'timetable of the day' designed to try and plug leaking system.

A proper service guarantee should be just that - a mark of how confident the supplier is of delivering a quality product; instead we seem to have ended up with 'yes, your train will quite likely be late, but here's £1.20 back' (or whatever). Oh, and if you claim it too often, we'll investigate you for fraud. Have a nice journey'. Then again, that's what you get when Ministers make business decisions.

 

[Starmill]

Delay Repay is real money, and is ultimately being paid by the taxpayer. I know lots of people are fans of this Government cashback scheme, but like furlough or any other handout it doesn't come for free. Even in the defunct franchise system, an awful lot of these supposed 'TOC' penalties were just being recycled back to the taxpayer. The worst thing was that due to any real lack of direct accountability, instead of incentivising better performance it just becomes another cost.

This gets us to the ludicrous situation whereby Avanti (for example) operates a service in meltdown and then ends up handing wads of fare income back to passengers. Does anyone think that that is better than actually running a decent service?

Then of course, when it finally dawns of DfT how it works, we get things like 'timetable of the day' designed to try and plug leaking system.

A proper service guarantee should be just that - a mark of how confident the supplier is of delivering a quality product; instead we seem to have ended up with 'yes, your train will quite likely be late, but here's £1.20 back' (or whatever). Oh, and if you claim it too often, we'll investigate you for fraud. Have a nice journey'. Then again, that's what you get when Ministers make business decisions.

Lucky it's entirely unlike the Coronavirus Job Retention Scheme in its scale, so as such a comparison isn't enormously useful

However, you're of course totally right to suggest that relatively small areas of cost such as administration and payment of compensation is easily overlooked. If it actually made the industry more efficient and came as a part of a wider package of reducing costs it would be very sensible to cut back on compensation payments for short delays or which are of very low value.

 

[thedbdiboy]

Lucky it's entirely unlike the Coronavirus Job Retention Scheme in its scale, so as such a comparison isn't enormously useful

Fair point, a little exaggeration to get things across

 

[thenorthern]

It's not just the delay repay although making delay repay easier and sometimes automatic means TOCs will be losing more revenue. 10 years ago from what I remember delay repay claims were quite rare, I always did them if I was delayed but I assume I was in a relatively small minority given it involved filling out a form and posting it.

Last night I was at Stoke-on-Trent where the 22:46 CrossCounty service to Birmingham New Street was cancelled so passengers were put on the 22:18 Northern departure from Manchester Piccadilly to Stoke-on-Trent (a very long journey on a 323) then transferred to a rail replacement Bus which left Stoke-on-Trent at around 23:45. Given a large amount of those passengers will have automatic delay repay and given the cost of hiring a coach at 23:00 at short notice the cost to CrossCounty would have been very high.

I do wonder how much the disruption is costing the railway companies and the government.

 

[A0wen]

The money seems to exist sufficiently to pour into the pockets of (e.g.) First Group shareholders.

The profit margins are less than 3% - so hardly significant sums - the company annual reports tell you that if you bother to look at them.

Annual Report 2023 – FirstGroup plc

Annual Report 2023

www.firstgroupplc.com

It's telling that 68% of First Group's revenue comes from it's rail division but only 35% of the group profits do. The profit was under £90m for the rail division - against 201 m rail passenger journeys, so even if you eliminated First Group's profit and put it to reducing fares you're reduce fares on average by a grand total of...... 45p.

 

[uww11x]

It will count against their performance metrics, so it will affect the level of performance fee they earn.


Yawn, this again? The profits on NRCs are tiny in the grand scheme of things. Yes, with the DfT pulling all the strings you have to wonder what the point of having private TOCs really is. But a ~2% profit margin is peanuts.

From experience the profits from performance related measure aren't tiny. 1 medium sized operator I know made around £2m for performing well! The industry performance metric is a huge opportunity to make some serious cash! On the flip side you can lose a lot of cash!

 

[Watershed]

From experience the profits from performance related measure aren't tiny. 1 medium sized operator I know made around £2m for performing well! The industry performance metric is a huge opportunity to make some serious cash! On the flip side you can lose a lot of cash!

£2m is, relatively speaking, tiny to a business that deals in billions. If, as some have suggested, all the operators became OLRs, the performance fees across the industry would really not add up to much on a per-staff basis.

 

[uww11x]

£2m is, relatively speaking, tiny to a business that deals in billions. If, as some have suggested, all the operators became OLRs, the performance fees across the industry would really not add up to much on a per-staff basis.

They key point in my statement was 'medium operator' Unless your a huge conglomerate, shareholders and such like will be interested in a bonus £2m in profit.

 

[Clarence Yard]

From experience the profits from performance related measure aren't tiny. 1 medium sized operator I know made around £2m for performing well! The industry performance metric is a huge opportunity to make some serious cash! On the flip side you can lose a lot of cash!

Not in a NRC - the performance fee cannot be negative.

 

[Amlag]

On the other hand with so many passengers (often totally unnecessarily) buying tickets ‘on line’ in advance for local and non cheaper advance type tkts , to only change or cancel their travel plans for various short notice personal etc reasons, they do not seek a refund because the admin. costs (? £10 ) make it not worthwhile to seek a refund , thus the Train Operator keeps the increasingly significant money.

 

[JamieL]

The profit margins are less than 3% - so hardly significant sums - the company annual reports tell you that if you bother to look at them.

Annual Report 2023 – FirstGroup plc

Annual Report 2023

www.firstgroupplc.com

It's telling that 68% of First Group's revenue comes from it's rail division but only 35% of the group profits do. The profit was under £90m for the rail division - against 201 m rail passenger journeys, so even if you eliminated First Group's profit and put it to reducing fares you're reduce fares on average by a grand total of...... 45p.

Some very mixed messaging on this thread. Profit margins may only be 3% but that is still a significant lump of cash. Justified if a full service is being run, absolutely unacceptable if a reduced timetable is in place. The risk/reward balance is not well placed in Britain's privatised railways - TOCs need to be incrntivised to run services on time, to their final destination and with the appropriate capacity and classes. Anything else is just not on.

 

[A0wen]

Some very mixed messaging on this thread. Profit margins may only be 3% but that is still a significant lump of cash. Justified if a full service is being run, absolutely unacceptable if a reduced timetable is in place. The risk/reward balance is not well placed in Britain's privatised railways - TOCs need to be incrntivised to run services on time, to their final destination and with the appropriate capacity and classes. Anything else is just not on.

Except TOCs are dealing with belligerent unions, outdated working practises (which the unions won't agree to reform of), infrastructure failures (which remember is all under state control) etc. That they get over 90% to run on time is nothing short of remarkable and beats anything BR did - it's worth pointing out Avanti's current timetable is pretty much what BR ran *as a standard timetable* in 1982 - and tgat was without Industrial Action....

The problem is the unions think that because the taxpayer is footing the bill they can just hold the TOCs to ransom.

 

[Clarence Yard]

Some very mixed messaging on this thread. Profit margins may only be 3% but that is still a significant lump of cash. Justified if a full service is being run, absolutely unacceptable if a reduced timetable is in place. The risk/reward balance is not well placed in Britain's privatised railways - TOCs need to be incrntivised to run services on time, to their final destination and with the appropriate capacity and classes. Anything else is just not on.

It isn’t 3% on ex-franchised TOC operations - that 3% was on the whole FG rail division and that also includes balance sheet releases when all the franchises were terminated. The amount earned on fees from DfT TOCs is much, much less than 3%!

TOCs are not incentivised to run anything like they used to - they are now acting effectively as the DfT’s managing agents. There is a performance element to their fee but it isn’t only train performance that counts for that. And if the DfT reduces the service or formations, for budgetary reasons, that isn’t going to affect that part of the fee paid.

The “franchised” operation of the railway isn’t really privatised any more - just the management of 11 out of the 14 DfT TOCs still is.

 

[Nicholas Lewis]

Except TOCs are dealing with belligerent unions, outdated working practises (which the unions won't agree to reform of), infrastructure failures (which remember is all under state control) etc.

The TOCs were commercial enterprises who were best placed to deal with outdated working practices yet the accountants clearly saw that the current arrangements worked well and were financially very good for the operator so nothing changed. The franchises should have been left as they were as they would have made the right judgement call over what to pay the staff vs the revenue risk.

That they get over 90% to run on time is nothing short of remarkable and beats anything BR did - it's worth pointing out Avanti's current timetable is pretty much what BR ran *as a standard timetable* in 1982 - and tgat was without Industrial Action....

BA still had an almost hourly plane to Manchester in the 80's long gone as Virgin ran a far superior service that wiped them out. Avanti are only there because Virgin got one over on the govt/civil service and they never forgave them now look at the mess WCML is in. Doubt we will ever seen two trains an hour to Manchester let alone three anytime soon if ever again as AWC are destroying the market.

 

[Bald Rick]

Doubt we will ever seen two trains an hour to Manchester let alone three anytime soon if ever again as AWC are destroying the market.

Thats very pessimistic. There will be two to Manchester in a few weeks, and I’d be surprised if there’s not three by the time of the December timetable change at the latest (which is 16 weeks away).

 

[Taunton]

I doubt the railway loses much to Delay Repay because I suspect very few actually claim it, or know how to, or can be bothered (the Railway Bubble on here excepted).

More will go in various alternative arrangements like the taxis.

The real huge loss, rather unmeasurable, is those who now choose not to start a train trip in the first place, go by car instead, or do something else. For example, going to the airport for your fortnight's holiday. How can you be sure they will not be on strike, or no staff, or you have to stand all the way after yours was cancelled, or whatever, when you return. Easier to just take the car. For my own business travels, I've given up for a couple of months now, and drive, it's just too uncertain, and all the hoo-hah about "there's ticket acceptance in place ... no there's not ... yes there is but only on option C, not option B ... that's not valid - pay again", instead of the good old "any reasonable route" thing all just makes contemplating the train impractical.

 

[Watershed]

Some very mixed messaging on this thread. Profit margins may only be 3% but that is still a significant lump of cash. Justified if a full service is being run, absolutely unacceptable if a reduced timetable is in place. The risk/reward balance is not well placed in Britain's privatised railways - TOCs need to be incrntivised to run services on time, to their final destination and with the appropriate capacity and classes. Anything else is just not on.

The majority of the 'profit' is in the performance fee, where issues such as cancellations and punctuality are significant factors.

However, equally, most reduced timetables, delays and cancellations can be attributed directly or indirectly to the government's penny pinching attitude of late.

Therefore the government know they are in no position to be cutting TOCs' fees because of decisions they have made about funding, pay rises etc. And that's why, just as in the olden days of franchises, lots of the issues we are now seeing (e.g. resource driven cancellations the night before) are to avoid the TOC carrying the can for government policy/funding decisions.

 

[Nicholas Lewis]

It isn’t 3% on ex-franchised TOC operations - that 3% was on the whole FG rail division and that also includes balance sheet releases when all the franchises were terminated. The amount earned on fees from DfT TOCs is much, much less than 3%!

So taking FGWR as an example they earn a fixed management fee of £6.9m per annum to deliver the contract and there is the opportunity to earn an additional performance-based fee of up to £17.8m per annum so £24.7m but given they reported operating costs of 1.3B it would appear low. However, c£400m of those costs are NR track access charges and the Agility train leases which are govt lead so they shouldn't be earning a fee on them so does look like best case is under 3%. Given the DfT retains all revenue risk and substantially all cost risk seems reasonable opportunity to me (construction companies be delighted with 3% and no cost risk) although be interesting to see what they and others manage to earn on the performance fees.

Thats very pessimistic. There will be two to Manchester in a few weeks, and I’d be surprised if there’s not three by the time of the December timetable change at the latest (which is 16 weeks away).

whats going to change or do you expect drivers to be more interested in overtime when the warm weathers gone