Virgin reckon WCML was a "struggling rail artery"

[Mr Spock]

One of the reasons why Virgin are getting a "subsidy" is because they have to pay more money to Network Rail in track access charges.

When the original franchise was agreed all track access was based on a type of jam spread allocation but after the WCRM spiralled out of control it was decided that the users of the route should pay for the upgrade which almost tripled virgins charges.

 

[Old Timer]

Yes but Virgin did not go into this blindfold, they knew there would be higher charges once the route was improved and in any case the journey reduction time would have generated increased traffic which would have reduced this anyway.

Virgin themselves continue to speak about increased usage of their services. They still make money and if the wished to reduce the subsidy they receive then they could easily raise the prices of the lowest fares and still not lose revenue given how ridiculously cheap they are.

I can assure you 100% that Virgin would not be there if it did not make money for them.

 

[LNW-GW Joint]

Well what was your solution to the West Coast franchise in 1997?
What would a management buy-out have done? or NX?
I suspect we would have seen a lot of paint used but no new trains bought.
If you are looking for a West Coast villain it was surely Railtrack, not Virgin.

 

[Zoe]

If I remember correctly, the alternatives to Virgin at the time were a manangement buy-out and maybe National Express.
Only VT (51% Branson plus 49% private equity eventually sold to Stagecoach) offered anything better then a like-for-like modernisation (ie 110mph non-tilt) which was the baseline DfT deal when Railtrack was privatised.

Bidders were invited in 1996 to put forward proposals for improved frequency and journey times based on a 125 mph railway. OPRAF negociated this upgrade with Railtrack. The franchise was then let to Virgin by OPRAF before Virgin agreed the 140 mph upgrade with Railtrack.

 

[LNW-GW Joint]

Bidders were invited in 1996 to put forward proposals for improved frequency and journey times based on a 125 mph railway. OPRAF negociated this upgrade with Railtrack. The franchise was then let to Virgin by OPRAF before Virgin agreed the 140 mph upgrade with Railtrack.

I thought PUG1 was a tripartite OPRAF/Railtrack/Virgin thing?
Were there any other new-train proposals?

 

[Zoe]

I thought PUG1 was a tripartite OPRAF/Railtrack/Virgin thing?
Were there any other new-train proposals?

Interesting reading here: http://www.railwaysarchive.co.uk/documents/ORR_Pug2Consultation.pdf A new fleet of trains was assumed for this upgrade but back in the day the DoT wasn't directly involved in rail franchises like the DfT is now and this was the domain of OPRAF. I doubt OPRAF would have actually specified the trains though as they did seem to be much more hands off than the SRA and DfT later were so it would be interesting to know what the other bidders would have done different if they did indeed respond to the invitation to bid based on the upgrade to 125 mph.

 

[Old Timer]

Well what was your solution to the West Coast franchise in 1997?
What would a management buy-out have done? or NX?
I suspect we would have seen a lot of paint used but no new trains bought.
If you are looking for a West Coast villain it was surely Railtrack, not Virgin.

I am not looking for a WCML villian.

What Virgin Trains state on their website about their involvement in the WCML upgrade is far from the truth and disingenuous at best. They were far from supportive to those engaged in doing the work, for example insisting on late running last trains running via the Trent thereby causing a delay to work and in some cases being directly responsible for a very large amount of work being cancelled in consequence in an already overly tight programme.

This work had to be recovered and ultimately all these delays impacted upon one another. More co-operation would have been far more beneficial all round. Following the Rugby over-run, partially caused by refusals to allow the actual time needed, we even had the scenario of Virgin arguing about the time needed for track renewals works with their "experts" suggesting ridiculously short duration times. I doubt they would have welcomed our input into how they could have run their own operations more efficiently.

 

[ChrisCooper]

Well what was your solution to the West Coast franchise in 1997?
What would a management buy-out have done? or NX?
I suspect we would have seen a lot of paint used but no new trains bought.
If you are looking for a West Coast villain it was surely Railtrack, not Virgin.

You mean the same National Express who had introduced new trains to 3 of their original 4 franchises very early on during operation? They also introduced additional new trains to c2c when they took that over (Prism Rail only bought the first batch of 357s to replace the 310s, NX replaced the 312s and 317) that went beyond the franchise requirement. For all the bashing everyone gives them, they provided a hell of a lot of orders for Derby during the difficult first few years after privatisation, well before the big 375 and 377 orders came in.

 

[LNW-GW Joint]

I am not looking for a WCML villian.

What Virgin Trains state on their website about their involvement in the WCML upgrade is far from the truth and disingenuous at best. They were far from supportive to those engaged in doing the work, for example insisting on late running last trains running via the Trent thereby causing a delay to work and in some cases being directly responsible for a very large amount of work being cancelled in consequence in an already overly tight programme.

This work had to be recovered and ultimately all these delays impacted upon one another. More co-operation would have been far more beneficial all round. Following the Rugby over-run, partially caused by refusals to allow the actual time needed, we even had the scenario of Virgin arguing about the time needed for track renewals works with their "experts" suggesting ridiculously short duration times. I doubt they would have welcomed our input into how they could have run their own operations more efficiently.

I don't doubt there are engineer-operator horror stories on WCRM, and I have felt the lash of Virgin's bossy tongue myself (in an airline contract situation).
I just think they have done pretty well batting for the route and its users over the years.
Actually I thought TV4 and the later WCRM work was very well run, unlike earlier fiascos like Stockport and others along the way.

 

[Mr Spock]

I can assure you 100% that Virgin would not be there if it did not make money for them.

This is a bit of a ridculous statement as no franchise operator would be involved if they were not making money so why pick on Virgin.

As for the increase in track access charges they might have expected some increase when the agreement was signed but that would of been based on the expected cost of £2-3billion not the eventual £8 billion.

Their access charges were nigh on tripled and this was seen as a major change and therefore additional money was made available to Virgin to cover these costs which resulted in them receiving a "subsidy" which was just a way of giving the money to Network Rail but via the customer instead of a direct grant.

 

[HSTEd]

Wait, wasn't the West Coast route the most popular long-distance railway route under British Rail?

Wasn't that why it was electrified in the first place?

 

[Old Timer]

This is a bit of a ridculous statement as no franchise operator would be involved if they were not making money so why pick on Virgin.

As for the increase in track access charges they might have expected some increase when the agreement was signed but that would of been based on the expected cost of £2-3billion not the eventual £8 billion.

Their access charges were nigh on tripled and this was seen as a major change and therefore additional money was made available to Virgin to cover these costs which resulted in them receiving a "subsidy" which was just a way of giving the money to Network Rail but via the customer instead of a direct grant.

The upgrade of the WCML would have resulted in very much increased track access charges as was made quite clear during the process.

Any business must also expect the possibility of things going wrong (its called the risk factor) and include that within its calculations.

Given the inept way that Network Rail "manages" its business any TOC franchise is in effect a licence to print money

 

[route:oxford]

The passage of time has an interesting effect on peoples memories.

I do recall that if I were travelling from Stirling to London in the early 90s, there is no way that I would have gone via Glasgow and the WCML.

Likewise I strongly recall completely knackered Mk2s (or maybe even Mk1s???) with stupid "winged" headrests on Cross Country Services between Glasgow/Edinburgh & Manchester/Oxford services. They were so bad that when I visited Oxford, I chose to pay the extra to travel via London.

 

[Mr Spock]

The upgrade of the WCML would have resulted in very much increased track access charges as was made quite clear during the process.

Any business must also expect the possibility of things going wrong (its called the risk factor) and include that within its calculations.

Given the inept way that Network Rail "manages" its business any TOC franchise is in effect a licence to print money

The West Coast franchise was agreed with a certain level of charges and when the government (through their agents - SRA) changed the method of calculation resulting in far higher charges the franchise costs were adjsuted to take into account this change.

Things going wrong do not extend to one party to the agreement (the government) changing the levels of paymentsrequired in the agreement.

We know that franchises are a way of making money but since Virgin took over the West Coast all there have been are complaints about there profits yet no one ever complains about the biggest money making franchise which was GNER until they overbid on a relet when they then bailed out.

 

[tbtc]

The upgrade of the WCML would have resulted in very much increased track access charges as was made quite clear during the process

If it was in need of that much of an upgrade then maybe it was a struggling rail artery?

Given the inept way that Network Rail "manages" its business any TOC franchise is in effect a licence to print money

Well, not enough for Prism (with their four franchises) or GNER or NXEC to keep their heads above water...

 

[Old Timer]

We know that franchises are a way of making money but since Virgin took over the West Coast all there have been are complaints about there profits yet no one ever complains about the biggest money making franchise which was GNER until they overbid on a relet when they then bailed out.

You are obviously unaware that GNER ran without subsidy and paid a positive return to the Treasury.

It bid based upon information that was made available by the Labour Government and promises made during the bidding process with regards to protection from the introduction of other Operators - Virgin Trains has a similar agreement.

Franchises were also bid on the basis of certain economic models. Of course as we know to our cost, the economic outlook for the UK was not as rosy as Labour had pretended, and more than one Franchise found itself in difficulty faced with falling traffic levels. I not particularly you fail to mention National Express which baled out after having been given ECML on a plate.

In the case of GNER, which was actually positively contributing to the Treasury, the Government refused to renegotiate the terms of the Franchise despite having shown bad faith and allowed new operators access to the GN Main line in direct competition with GNER contrary to the Franchise agreement.

The Government also insisted on wholly unnecessary Parent Company Guarantees from Sea Containers, which at the time was in financial difficulties. GNER itself was a fully solvent and commercially viable operation and its proposals for Franchise renogotiation were reasonable given the economic climate, and would still have given the taxpayer a positive inflow of money to the Treasury, however the senior management team were not liked by a number of key individuals in Government, and conditions were set that were impossible for GNER to meet.

The removal of GNER from the Railway system is accepted by those in the know to have been a cynical manipulation through both Political and personal prejudice. These cynical machinations have cost the taxpayer millions of £s loss

It is a shame that you have swallowed the spin and hype surrounding this and regurgitated it rather than actually finding out the truth first.

Well, not enough for Prism (with their four franchises) or GNER or NXEC to keep their heads above water...

I rather hope you will note my response to the post above, and shame on you for not doing your homework properly with regards to GNER.

 

[tbtc]

I rather hope you will note my response to the post above, and shame on you for not doing your homework properly with regards to GNER.

But if any TOC franchise is in effect a licence to print money, as you said, then you'd have expected the GNER business to have been hived off from Sea Containers?

Can't have it both ways.

 

[Snapper]

You are obviously unaware that GNER ran without subsidy and paid a positive return to the Treasury.

It bid based upon information that was made available by the Labour Government and promises made during the bidding process with regards to protection from the introduction of other Operators - Virgin Trains has a similar agreement.

Franchises were also bid on the basis of certain economic models. Of course as we know to our cost, the economic outlook for the UK was not as rosy as Labour had pretended, and more than one Franchise found itself in difficulty faced with falling traffic levels. I not particularly you fail to mention National Express which baled out after having been given ECML on a plate.

That's not actually true.

The first GNER franchise received subsidy and never made any premium payments. Subsidy went from £49.82m in 1996/7 to £3.09m in 2001/2. Pending the second re-tendering process, the SRA granted GNER a 2-year extension to its franchise from April 2003. Although it was initially planned for GNER to pay a premium payment of £25.145m and £70.26m in 2003/4 and 2004/5 these explicit terms were dropped by the government. Instead GNER was expected to 'invest' some £100m in the network. Like many - I'll be damned if I can find £100m worth of enhancements GNER ever paid for.

GNERs second franchise business case was also based on receiving a very large subsidy - from Railtrack in the form of compensation for delays. Once NR got their act together and starting improving maintenance, these payments started drying up and GNERs finances began to go belly up as passenger numbers had been hopelessly optimistic.

Even Chris Garnett has admitted that this was the case. GNER were so dependent on this money that they refused to put any pressure on Railtrack to improve things - and even refused to join in with other TOCs on the route who did so.

So, when it comes to 'doing homework'...

As for this 'bad faith' nonsense about allowing open access operators. GNER knew full well this was likely to happen when they made their bid. It's rather instructive that their court action got nowhere.

 

[WatcherZero]

Their business case wasnt based on it, but it was what was keeping the afloat. The main thing that sunk them was the death of the parent company Sea Containers and the inability to maintain the deposit against operator financial failure required of all tocs.

 

[Snapper]

At seat service, individual TV screens, no Government subsidy are ones that spring immediately to mind.

It is common knowledge that you have good relations with Virgin, but this should not blind you towards seeing that they are not the shining star that their PR would suggest. I doubt anyone would have thought of the WCML being a "struggling rail artery" that was rescued by Virgin. I am still trying to think about how Virgin did this - bearing in mind that it was one of the most aggressive TOCs who argued time and time against the durations that were needed for the work.

A 'promise' of TV screens? Is that it? Was it a franchise commitment or just something they said they might do? They do have at seat service - in First Class, where does it say that this was a cast-iron 'promise' and franchise commitment in Standard?

As for the no subsidy. As Virgin don't own the tracks and had no control over Railtrack or PUGS1 or 2 that wouldn't be a promise that they could make nor any reasonable person accuse them of breaking. What they had control of they delivered on. Yes, their new trains were late, but that was the fault of the builders, not Virgin.

This is nothing to do with being a 'friend' of anyone. Merely understanding how the railways work, the full story and not having an axe to grind.
--- old post above --- --- new post below ---

Their business case wasnt based on it, but it was what was keeping the afloat. The main thing that sunk them was the death of the parent company Sea Containers and the inability to maintain the deposit against operator financial failure required of all tocs.

That wouldn't have mattered If the franchise was profitable Sea Containers would have had an asset to dispose of. It wasn't profitable - it was a liability not an asset. Within months of starting the second franchise Garnett admitted that. He told the Times in September 2006 that "GNER was no longer sustainable…the (profit) margins are too slender..."

In fact, DfT agreed to waive the bond.

 

[bnm]

The removal of GNER from the Railway system is accepted by those in the know to have been a cynical manipulation through both Political and personal prejudice. These cynical machinations have cost the taxpayer millions of £s loss

It is a shame that you have swallowed the spin and hype surrounding this and regurgitated it rather than actually finding out the truth first.

And that truth is what exactly? That from those 'In the know'? Without credible evidence either way then your point of view can be equally regarded as spin and hype.

 

[WatcherZero]

In fact, DfT agreed to waive the bond.

They agreed to waive it when they handed it back, but then they knew the bankrupt company couldnt pay it anyway so there was no point pursuing it.

 

[Snapper]

Not quite. It was agreed to waive it before they handed the franchise back. It was waived before the management contract where GNER remained caretakers until the franchise was handed over.

The idea was to secure GNERs co-operation in keeping things ticking over until the franchise was relet.

It was this experience that led DfT to setting up DOR as an 'operator of last resort' - able to manage more than one failing franchise.

 

[Mr Spock]

You are obviously unaware that GNER ran without subsidy and paid a positive return to the Treasury.

It bid based upon information that was made available by the Labour Government and promises made during the bidding process with regards to protection from the introduction of other Operators - Virgin Trains has a similar agreement.

Franchises were also bid on the basis of certain economic models. Of course as we know to our cost, the economic outlook for the UK was not as rosy as Labour had pretended, and more than one Franchise found itself in difficulty faced with falling traffic levels. I not particularly you fail to mention National Express which baled out after having been given ECML on a plate.

In the case of GNER, which was actually positively contributing to the Treasury, the Government refused to renegotiate the terms of the Franchise despite having shown bad faith and allowed new operators access to the GN Main line in direct competition with GNER contrary to the Franchise agreement.

The Government also insisted on wholly unnecessary Parent Company Guarantees from Sea Containers, which at the time was in financial difficulties. GNER itself was a fully solvent and commercially viable operation and its proposals for Franchise renogotiation were reasonable given the economic climate, and would still have given the taxpayer a positive inflow of money to the Treasury, however the senior management team were not liked by a number of key individuals in Government, and conditions were se t that were impossible for GNER to meet.

The removal of GNER from the Railway system is accepted by those in the know to have been a cynical manipulation through both Political and personal prejudice. These cynical machinations have cost the taxpayer millions of £s loss

It is a shame that you have swallowed the spin and hype surrounding this and regurgitated it rather than actually finding out the truth first.



I rather hope you will note my response to the post above, and shame on you for not doing your homework properly with regards to GNER.

Being a profitable franchise owner has nothing to do with paying a premium or receiving a subsidy but how much you are allowed to take in profits.

The GNER publicity machine was even better than Virgins and people like you fell for it as what did they do much beyond retaining restaurant cars which seemed to be their big selling point. Promises were made of 4 new parkway stations but I have never seen them, perhaps you can tell me where they are.

When they rebid for the franchise they overbid as they were desperate to reatin it and when the economy went pear shaped they were getting in trouble still as you said previously "Any business must also expect the possibility of things going wrong (its called the risk factor) and include that within its calculations" so why should the government allow them to renegotiate?

 

[Zoe]

When they rebid for the franchise they overbid as they were desperate to reatin it and when the economy went pear shaped they were getting in trouble still as you said previously "Any business must also expect the possibility of things going wrong (its called the risk factor) and include that within its calculations" so why should the government allow them to renegotiate?

GNER's difficulty was before the credit crunch/econmic crisis, they went onto management contract in 2006. I seem to remember the reasons cited were the reduction on travel to and from London since the 7/7 terrorist attacks and the fact that Grand Central were allowed to run. GNER were not expecting either of these events when they bid for the franchise.

 

[Snapper]

The problem is - neither is true.

They claimed 7/7 kept passengers away. And yet - no other Intercity TOC experienced the drop in passenger numbers that GNER claimed. It's hard to believe that people living along their route were more timid and frightened then those on the West Coast, or those in Devon and Cornwall.

As for not knowing about GC. All bidders for the East Coast franchise were specifically reminded about making allowances for open access in their bid by ORR in the ITT. That's why GNER never had a leg to stand on in their ill-conceived court case. OT tries to suggest that the moderation of competition rules that protected Virgin on the WCML also applied to the ECML. They did not - hence Hull Trains getting in first before GC. There was no 'betrayal' - OT is simply making things up I'm afraid.

The truth is closer to home. GNER got their bid wrong - as Garnett admitted a number of times. Their second bid was based on a seat occupancy level of 83% - commentators at the time (including Christian Wolmar and Roger Ford) expressed doubts that they could achieve this,

 

[cle]

Being a profitable franchise owner has nothing to do with paying a premium or receiving a subsidy but how much you are allowed to take in profits.

The GNER publicity machine was even better than Virgins and people like you fell for it as what did they do much beyond retaining restaurant cars which seemed to be their big selling point. Promises were made of 4 new parkway stations but I have never seen them, perhaps you can tell me where they are.

When they rebid for the franchise they overbid as they were desperate to reatin it and when the economy went pear shaped they were getting in trouble still as you said previously "Any business must also expect the possibility of things going wrong (its called the risk factor) and include that within its calculations" so why should the government allow them to renegotiate?

I agree - people fell for GNER's faux-nostaglia and conservative branding hook, line and sinker.

They kept none of their promises, invested little, conceded a huge amount of the London-Edinburgh market to air, and ultimately failed, but are revered as stalwarts. It's pathetic, naive and embarrassing - the Daily Mail of TOCs.

 

[Old Timer]

As for not knowing about GC. All bidders for the East Coast franchise were specifically reminded about making allowances for open access in their bid by ORR in the ITT. That's why GNER never had a leg to stand on in their ill-conceived court case. OT tries to suggest that the moderation of competition rules that protected Virgin on the WCML also applied to the ECML. They did not - hence Hull Trains getting in first before GC. There was no 'betrayal' - OT is simply making things up I'm afraid.

You know that this is a gross over-simplification and that certain assurances were given by Ministers with regards to access by other Operators. Unfortunately for GNER these were verbal.

...The truth is closer to home. GNER got their bid wrong - as Garnett admitted a number of times. Their second bid was based on a seat occupancy level of 83% - commentators at the time (including Christian Wolmar and Roger Ford) expressed doubts that they could achieve this,

No one has ever denied this, however as you know again, your comment is a gross oversimplification in that it ignores the discussions that took place in the lead up to the bid, and the disinformation being spread about the intents and values others were putting on the Franchise.

GNER were obviously correct to go for a renegotiation as we have seen what has happened since.

 

[Eagle]

You know that this is a gross over-simplification and that certain assurances were given by Ministers with regards to access by other Operators. Unfortunately for GNER these were verbal.

Verbal assurances by ministers? I've seen navel fluff that's worth more

 

[jon0844]

When they rebid for the franchise they overbid as they were desperate to reatin it and when the economy went pear shaped they were getting in trouble still as you said previously "Any business must also expect the possibility of things going wrong (its called the risk factor) and include that within its calculations" so why should the government allow them to renegotiate?

I liked GNER don't get me wrong, but it's worth adding that even at the time, there were plenty of people who said their bid was ridiculous (and NX bidding more was even more stupid!) and had foreseen problems ahead for the economy.

7/7 may have had an impact, but only in the short term. Most people just picked themselves up and carried on, determined not to be intimidated by terrorism.

GC I'm not sure about.

I am also of the opinion that many businesses were already cutting back on travel expenses, recession or not, so there may have been a fall in first class anytime ticket sales at the expensive of advance/standard class tickets - just like the airlines.

I don't know anything about the internal politics in the whole thing (the likes of OT will know all of that) so I can only speak from a customer perspective. From there, GNER had the sort of romantic image that Eurostar still enjoys today. I'd also say that Virgin probably still retains this, from its strong brand.