TOCs in turmoil
Emergency talks to stop franchise failures
RAIL understands that train operators are negotiating with Government regarding their contracts, as passenger numbers rapidly decline because of the COVID-19 pandemic.
Secretary of State for Transport Grant Shapps told the BBC that numbers had dropped by around 20%. But he made these comments before Prime Minister Boris Johnson then announced that it was advisable, wherever possible, that people should work from home.
A spokesman for the Rail
Delivery Group said: “Train companies are regularly in discussions with the Government about a range of things that affect the railway.”
However, an industry source told RAIL that margins are so slim, and that with several operators not making profits, all operators are likely to be in discussion with Government. The source said there wasn’t the flexibility in the system for train operating companies (TOCs) to manage such big declines.
RAIL’s Industry Insider (see page 76) highlights reports that South Western Railway, TransPennine Express, Greater Anglia and Essex Thameside (c2c) are all on the brink of financial failure. Some, such as GA, are already known to be renegotiating their existing deals, while SWR is expected to be the next to join those under the umbrella of the Government’s Operator of Last Resort.
Industry Insider states: “Most franchised operators are likely to run out of cash within a month and will require support from their parent companies, which in the main are national rail operators from abroad.”
A Department for Transport spokesman told RAIL on March 17: “We are working closely with the industry to develop proposals which will protect the services passengers rely on and stabilise rail operations. We have had no discussions, or been presented with proposals, which would see franchises transfer to public ownership.”
DfT confirmed that TOCs were working on contingency plans to enable services to continue even if staff are affected.
“We recognise how difficult the current situation is for the transport sector, and across Government we are engaging with the sector’s leadership to support workers, businesses and passengers,” it said.
“HMRC is ready to help all businesses and self-employed
individuals experiencing temporary financial difficulties due to Coronavirus.”
DfT officials have been working with the rail industry throughout the outbreak, with further discussions planned for the week after this issue of RAIL went to press.
Shapps has also written to trade unions on the difficulties facing the sector, with meetings due to be organised.
The franchise uncertainty comes at a time when two operators’ Direct Awards are due to expire at the end of March. Both Great Western Railway and Southeastern have been negotiating likely extensions, while the delayed Williams Review, which was to be published as a White Paper, was set to offer major changes to franchises.
A GWR spokesman told RAIL that owner FirstGroup was still expecting a Direct Award to be signed in the coming days. A DfT spokesman told RAIL: “We do not comment on live commercial issues. An announcement on the future of the franchise will be made later this month.”
As for the Williams Review, informed sources suggest it could be delayed until May, June, or even the autumn.
A DfT spokesman told RAIL:
“This Government is completely committed to bringing forward vital sector-wide reforms following the Williams Rail Review.
“The performance and stability of operators in recent months has underlined the need for wholescale reform, and our commitment to delivering significant investment into our railways means it is essential that we take the time to get this right for passengers and the industry.
“We are already acting on the emerging ambitions of the review - including trialling flexible fares and focusing the industry on improving performance, with strengthened monitoring of on-time services.
“We expect publication of the White Paper before the summer recess, with reforms which will put passengers first, end the complicated franchising model and simplify fares to create a simpler, more effective system.”
On March 16, Rail Minister
Chris Heaton-Harris told Jo
Stevens (Labour, Cardiff Central) in a Commons Written Reply that Williams was expected to be published before the summer recess, which begins on July 21.