28 SEPTEMBER 2020
© 2022 Business Travel News Ltd.
The coronavirus pandemic has been fatal for the system of franchising railway passenger operations in Great Britain, which has run with several changes since the mid-1990s. Andrew Sharp, the former Director General of the Air Rail Organisation (IARO), reports.
In March, when the Great Pause started, the Government provided six-month emergency measures agreements for passenger train operators, underwriting losses caused by the dramatic drop in ridership. These are now to be replaced by Emergency Recovery Management Agreements (ERMAs) under plans announced by the Secretary of State for Transport on 21 September. ERMAs will make up any shortfalls in revenue between now and (generally) March 2022; these payments are likely to amount to around £500m a month, depending on passenger numbers. Annual rail passenger revenue is normally around £9bn.
Ridership, of course, depends to a degree on Government policy; so far this has been messy. Train services were much slimmed down in April in response to the ‘Stay at home’ policy; this policy was reversed one Saturday when people were told to go back to work on Monday if they could. But you can’t just switch on a complete new train timetable with dramatic increases in services at a couple of days’ notice; trains are scheduled, signalled, driven and maintained by people and that kind of change needs careful planning for safe operation – especially with additional pandemic-related precautions. And now, of course, the ‘work from home if you can’ policy is being reinstated!
Between 31 March and mid-May, the railway system was only carrying about 5% of normal passenger numbers: this rose slowly to 20% in early July. Now, the percentage has crept up to the high 30s. The trend has been very similar for the London Underground network.
Under the ERMAs, existing train operators will keep running trains; they will have to provide an almost-full timetable, to allow passengers to maintain social distancing. The earlier emergency measures paid train operators a 2% premium over their pre-pandemic costs while the Government took all the revenue; this figure will be reduced to a maximum of 1.5% and will be related to the performance of individual operators. How this incentivisation will work is unclear; passenger satisfaction, punctuality, reliability and fare revenue have been suggested as key criteria. But with the Department for Transport (DfT) paying the bills, decisions on service enhancements and innovations will be complex. How far will local decision-making be possible?
Financial arrangements for terminating the old franchises are to be negotiated by mid-December. This will be a difficult balancing act, because the Government has limited capacity to operate trains if franchisees decide to default instead of accepting the Government’s offer. Another alternative could be for operators to revert to pre-existing franchise arrangements.
The current plan is for new direct contracts to be awarded to operators as the ERMAs expire in spring 2022 (or, apparently, in some cases before, depending on the existing arrangements between operator and DfT).
The Secretary of State’s statement said that the previous franchising arrangements would be replaced by a new deal which would keep the best elements of the private sector, including competition and investment; it will also be designed to deliver strategic direction, leadership and accountability. Those who have watched the evolution of rail policy since privatisation are not holding their breath.
Franchising has delivered; the trains have continued to run. But recently, Government-led failures to deliver infrastructure upgrades, industrial action, over-bidding for franchise contracts and late delivery of rolling stock have led to major problems for the system. In September 2018, a review of the process was set up under the chairmanship of former BA Chief Executive Keith Williams – who always said he was the independent Chair of a Government review and not the chair of an independent review. Originally to be published in autumn 2019, it was further delayed from an April 2020 date by the pandemic. Now, it is said that a White Paper will be published when the course of the pandemic is clearer.
The position of open-access train operators – Heathrow Express, Grand Central and Hull Trains – is unclear. They are outside the franchise system and receive no direct subsidy. Heathrow-owned Heathrow Express is unaffected by the changes to the system and the new Government funding arrangements. It has obviously been badly hit by the dramatic drop in air traffic, but is likely to continue to run a reduced (half-hourly) service between London and its leading airport. Grand Central (operated by Arriva Trains, currently owned by German Railways but likely to be sold) announced on 20 September that it was running a full service. Hull Trains, operated by First Group, suspended operations for five months during the pandemic but has now restarted with a brand-new fleet of bi-mode trains.
Train operators are going to be compensated for running a nearly full timetable (to ensure social distancing) while passengers are being urged to work from home if they can. And an improved new deal for train operators is being devised by the Government, following what is either the 30th or 31st review of the rail industry since 2006 (according to a leading rail journalist). Watch this space!
Also see Rail franchising ends in this week's BTN.
All comments are filtered to exclude any excesses but the Editor does not have to agree with what is being said. 100 words maximum
John Burke, Sussex
The big four railway companies became a historical anomaly until the postwar Labour government intervened. Statal ownership does not work in some industries, but for trains it meant co-ordination and economy of scale plus social benefit that offset losses. Privatization has brought back even more fragmentation, apparently required by EU rules. In the good, old days even the Belgian ferry waited if a train reached Dover late.
John Scent, NORWICH
And still hey insist on going ahead with HS2....what a waste of money that is in these times of financial hardship
Andrew Sharp, Surbiton
Mr West, One of the benefits of privatisation was the preservation of what were called 'network benefits'. This meant that you could go to any staffed railway station and buy a ticket from anywhere in the country to anywhere else in the country, specifying that you wanted the fastest or cheapest route, and train operators were obliged to meet your request. So do not pay a 10% surcharge - just go to your nearest staffed National Rail station.
David Starkie, London
This is a very useful overview. It also brings out how costly the rail system is, but the cost of keeping the train operators (£500m per month) is only part of the story. The nationalised Network rail that looks after the infrastructure has racked up net debt prior to 2020 of £54billion!
Jeff West, London
Does all this mean that we are going back to British Rail with just one timetable and one operator and no third party adding on 10% if you book through them.