Rail Franchises to be Replaced with Fixed Fee Contracts

[357]

Too early yet.

Yeah, I doubt it would be front page anyway - too many other things happening. In an email today, my TOC has told me "first thing tomorrow" for the details of what's happening.

 

[dk1]

Yeah, I doubt it would be front page anyway - too many other things happening. In an email today, my TOC has told me "first thing tomorrow" for the details of what's happening.

I'm not expecting it in tomorrow's papers. Ink will be well dry by then. Twitter etc & as you say possibly some internal emails flying about. I might even make an effort & set my alarm.

 

[ScottGallagher]

How many operators will have been straight enough to say to Shapps, -Thank you... but no thank you.

 

[HarryL]

I can't imagine Avanti to be too happy having got the franchise in December only for the franchising to come to an end a few months later?

 

[ScottGallagher]

I can't imagine Avanti to be too happy having got the franchise in December only for the franchising to come to an end a few months later?

They will be very happy if they were going to lose money on it long term, bit like a get out of jail card so early on !.

 

[717001]

There is a press release from Go-Ahead https://www.londonstockexchange.com...tr-contract-to-run-to-september-2021/14691916

New GTR contract to run to September 2021

The Department for Transport (DfT) has announced that GTR's Emergency Measures Agreement (EMA), which ended on 20 September 2020, has been replaced by an Emergency Recovery Measures Agreement (ERMA).

GTR will operate under its ERMA until the end of its contract term in September 2021, with the potential for a further extension.

GTR's ERMA, which generates a margin of up to 1.5 per cent, is a management contract with no exposure to changes in passenger demand or ancillary revenue, such as car parking and retail commission.

Go-Ahead's other UK rail franchise, Southeastern, will continue operating under its EMA until October 2021, or March 2022 if extended.

Approximately 90 per cent of total Group revenues are generated through contracts where there is no direct revenue risk from changes in passenger demand.

David Brown, Go-Ahead CEO, commented:

"This contract reaffirms the Government's recognition of the important role rail plays in driving economic growth and in connecting communities. Independent passenger surveys have found that people who have recently travelled on our services found them to be clean, safe and reliable. We look forward to welcoming more passengers back onto our trains."

Patrick Verwer, GTR CEO, said:

"We welcome today's announcement and the stability this new agreement brings for our colleagues, who continue to focus on providing a safe and reliable service as we welcome back more customers. Going forward, we will continue to work with our partners and stakeholders across the industry to help reconnect communities, improve our performance and ensure high levels of customer satisfaction."

ENDS

 

[Bletchleyite]

Predictions of FirstGroup's exit were perhaps a little premature:

Statement re further rail agreements with UK government

otp.tools.investis.com

part quote:

Statement re further rail agreements with UK government

Released : 21.09.2020


FirstGroup plc

Further rail agreements with UK Government

FirstGroup plc (FirstGroup or the Group) is pleased to announce that the Department for Transport (DfT) has extended the emergency funding arrangements for the UK rail industry for the next six to 18 months.

New Emergency Recovery Measures Agreements (ERMAs) came into force yesterday for our South Western Railway (SWR), TransPennine Express (TPE), and West Coast Partnership (WCP, comprising HS2 shadow operator and Avanti West Coast) operations.

The ERMAs replace the Emergency Measures Agreements, which were put in place by the DfT in March to provide continuity for rail passengers and the industry during the coronavirus pandemic, and are similar in operation. During the term of the ERMAs, the DfT will continue to waive the revenue, cost and contingent capital risk of the train operating companies (TOCs) and will pay them a fixed management fee. There is also the potential for an additional performance-based fee, based on measures including punctuality, passenger satisfaction and financial performance. The overall fee potential is a maximum of 1.5% of the cost base of each franchise prior to the pandemic. The fixed fee and overall fee potential for each TOC is lower under the new ERMAs compared with the Emergency Measures Agreements, and more heavily weighted to performance delivery. The ERMAs make no material changes to the ring-fenced cash or working capital mechanisms in place for these operations.

The new ERMA for WCP, which commenced operations in December 2019 and was performing well prior to the pandemic, is in place to the end of March 2022. The new SWR and TPE ERMAs are in place to the end of March 2021, with the potential in the case of TPE to be in place until September 2021 in certain circumstances. In addition, all three include options to extend their duration by a further half year at the DfT’s discretion. As announced earlier this month, the Emergency Measures Agreement for Great Western Railway (GWR) has already been extended to at least 26 June 2021.
The DfT has also stated it intends to begin discussions with the TOCs to transition to new, directly-awarded contracts for the longer term, which would come into effect at the end of the ERMAs.

To this end, each of the ERMAs requires that by mid-December 2020 the TOC agrees with the DfT whether, and if so, how much parent company support or other payments are required to terminate the pre-existing franchise agreements. If any such termination sums are agreed, they would fall due at the end of the ERMA term, at which point the pre-existing franchise contract would also terminate by agreement. However if the termination sum for a TOC cannot be agreed by mid-December then the DfT has the right to terminate that ERMA early, with the TOC reverting to substantially all of the pre-existing franchise terms, from mid-January 2021. Assuming the termination sums are agreed, the DfT intends to negotiate a new direct award contract under which the TOC will deliver passenger rail services following the end of the ERMA.

Can't see anything from Abellio or Arriva yet.

 

[158801]

TPE only gets an initial 6 month extension.

 

[Supertrains19]

At least Firstgroup went into more detail with that mid Dec 20 cut off to accept the Groups commitment to the new deal moving forward, RMT have just published a statement as well on them. Although looks like the Management fee is cut and will be interesting to see detail on performance related punishment. Feel this is just a stop gap and to give DFT and TOCS more time to negotiate.

 

[KashmireHawker]

So far confirmed, are FirstGroup with:

• West Coast Partnership until March 2022
• TPE & South Western until March 2021, with option for extension until September 2021 for TPE
• GWR until June 2021

And GoAhead Group:

• Great Northern, Gatwick Express, Southern and Thameslink until September 2021, with an option for an extension
• Southeastern until October 2021, with an option for an extension

For FirstGroup: https://otp.tools.investis.com/generic/regulatory-story.aspx?newsid=1417411&cid=858

The new ERMA for WCP, which commenced operations in December 2019 and was performing well prior to the pandemic, is in place to the end of March 2022. The new SWR and TPE ERMAs are in place to the end of March 2021, with the potential in the case of TPE to be in place until September 2021 in certain circumstances. In addition, all three include options to extend their duration by a further half year at the DfT’s discretion. As announced earlier this month, the Emergency Measures Agreement for Great Western Railway (GWR) has already been extended to at least 26 June 2021.

And for GoAhead: https://www.londonstockexchange.com...tr-contract-to-run-to-september-2021/14691916

GTR will operate under its ERMA until the end of its contract term in September 2021, with the potential for a further extension.

GTR's ERMA, which generates a margin of up to 1.5 per cent, is a management contract with no exposure to changes in passenger demand or ancillary revenue, such as car parking and retail commission.

Go-Ahead's other UK rail franchise, Southeastern, will continue operating under its EMA until October 2021, or March 2022 if extended.

 

[gledhill56]

A very interesting press release:

Rail franchising reaches the terminus as a new railway takes shape 

New system will end franchising model and deliver a simpler, effective model through high performance targets and simplified journeys.

www.gov.uk

 

[Boo_]

Well they can take it or carry on as there agreement they signed with no support and they be mad to do that. Think it was the best time to get hold of the network without a buy back.

 

[flitwickbeds]

So far confirmed are:

• West Coast Partnership until March 2022
• TPE & South Western until March 2021, with option for extension until September 2021 for TPE
• GWR until June 2021
• Thameslink until October 2021, with an option for an extension
• Southeastern until September 2021, with an option for an extension

GTR also includes Southern, Great Northern and Gatwick Express.

 

[Supertrains19]

The government says in the press release:

Management fees will now be a maximum of 1.5% of the cost base of the franchise before the pandemic began. The ERMAs are a transitional stage to the new system, the biggest change to the railways in a quarter of a century.

But all those dates are at very different stages through 2021 and 2022 so it’s going to be some time before every TOC is in the same playing field as others.

 

[yorkie]

Just a gentle reminder we absolutely do welcome any ideas/suggestions but please create a new thread (or use an existing one) in the Speculative Ideas section to post them there.

You are welcome to post a link to any such thread from this thread.

Thanks

 

[LNW-GW Joint]

There's no specific date for introducing the new system, as the Press Release says it is subject to the progress of the Covid emergency.
It will also require a new Railways Act.
Presumably the existing franchise agreements can now be torn up, as DfT will not revert to them as a default which is the current status.
It's also clear the concessions will be competed for.

Grant Shapps was very vague in his R4 interview this morning. It still seems a long way to go to reach the new system.
Nothing from Wales or Scotland yet, but they are pretty much bound to follow the same framework, even if the concessions are let separately.

ending the uncertainty and confusion about whether you are using the right ticket or the right train company. 

I don't think even BR managed to achieve this, with time, route and train type restrictions on many tickets.

 

[Bletchleyite]

Grant Shapps was very vague in his R4 interview this morning. It still seems a long way to go to reach the new system.
Nothing from Wales or Scotland yet, but they are pretty much bound to follow the same framework, even if the concessions are let separately.

Are they? Why can they not carry on with their concessions they already have? The matter is devolved, Network Rail aside.

 

[717001]

So far confirmed are:

• West Coast Partnership until March 2022
• TPE & South Western until March 2021, with option for extension until September 2021 for TPE
• GWR until June 2021
• Thameslink until October 2021, with an option for an extension
• Southeastern until September 2021, with an option for an extension

Last 2 dates look to be the wrong way round - GN/TL/Southern/GatEx is Sept and South Eastern is Oct

 

[dk1]

Nothing announced about the three English Abellio franchises yet unless I've missed it.

 

[Trogladyte]

How does this affect recruitment of staff? Does it at all?

 

[Bletchleyite]

Nothing announced about the three English Abellio franchises yet unless I've missed it.

BBC News seems to suggest they were all agreed. I guess Abellio and Arriva don't need to make the regulatory announcement in the same way as they are subsidiaries of German/Dutch companies rather than being listed on the UK stock exchange? (Apologies if I'm not quite right there).

 

[dk1]

How does this affect recruitment of staff? Does it at all?

I would imagine business as usual on that for front line staff anyway. How many depends though on whether the enhancements & franchise commitments continue.

 

[Boo_]

I would imagine business as usual on that for front line staff anyway. How many depends though on whether the enhancements & franchise commitments continue.

Yes they are talking about going along with the Overground / Merseyrail route of Management

 

[Bletchleyite]

Yes they are talking about going along with the Overground / Merseyrail route of Management

Doesn't Merseyrail (unlike previous incarnations of it) retain revenue risk? Hence stronger enforcement and those TOC specific day tickets?

Older non-revenue risk instances of it pretty much did away with revenue protection.

 

[LNW-GW Joint]

Are they? Why can they not carry on with their concessions they already have? The matter is devolved, Network Rail aside.

No, they have to abide by the Railways Act 1993 until it is replaced.
They have freedom to let their own franchise/concession within the scope of the Act (TfW and Scotrail are both currently full franchises, or were until Covid).
Scotland has an additional concession to allow public sector bids (not yet used).

 

[Meerkat]

Predictions of FirstGroup's exit were perhaps a little premature:

Statement re further rail agreements with UK government

otp.tools.investis.com

part quote:



Can't see anything from Abellio or Arriva yet.

So the DfT still intend to extract a pound of flesh for letting First out of the franchise agreements? Or is that just leverage to get them to agree Direct Awards as DfT want them?

A very interesting press release:

Rail franchising reaches the terminus as a new railway takes shape 

New system will end franchising model and deliver a simpler, effective model through high performance targets and simplified journeys.

www.gov.uk

It will keep the best elements of the private sector, including competition and investment, that have helped to drive growth, but deliver strategic direction, leadership and accountability.

The franchise system had strategic direction and leadership - that was DfTs failure. So not really sure how giving them more power is going to improve things.

 

[LowLevel]

Nothing announced about the three English Abellio franchises yet unless I've missed it.

Staff email from the EMR MD confirms it for all 3 franchises but no timescale mentioned.

 

[dk1]

Staff email from the EMR MD confirms it for all 3 franchises but no timescale mentioned.

Nothing for GA staff yet. News in 90 usually gets sent from JB mid-morning on a Monday so maybe then.

 

[swt_passenger]

Predictions of FirstGroup's exit were perhaps a little premature:

First have been predicticted to be “handing back the keys next month” ever since I joined the forum... Is it just possible there’s a few posters who always want it to happen, and interpret any news at all in that way?

 

[Nicholas Lewis]

This will be interesting to see the interpretation on what "almost a full service" actually means in practice

Under current public health guidance, the intention is also for operators to run an almost full service to ensure there is space to help passengers travel safely.

Also where is the impetus to get people back on the railway with new lockdown areas now imposing "essential use only" mantra again.

Ultimately though the Tories are standing four square behind the railways compared to the aviation industry so we need to applaud that.