KEOLIS BOSS UPBEAT AMID COVID BATTERING
KEOLIS has no intention of walking away from its Wales and Borders rail franchise in the face of a huge fall in passenger numbers as a result of the pandemic, while it remains confident that electrification of the Core Valley Lines will be completed by 2023 as part of its long-term commitment to Wales.
The French-owned global transport company, under its joint venture (KeolisAmey) with Spanishowned infrastructure support service provider Amey, took over the franchise from Arriva Trains Wales nearly two years ago, after a competitive bid process overseen by the Welsh Government’s transport body, Transport for Wales.
It was an inauspicious start for KeolisAmey, inheriting an ageing diesel fleet in frankly a far worse condition than they had anticipated, with storms putting many of them out of action in the first few weeks of the franchise back in October 2018.
It had been building momentum and capacity and frequency of service over the past year, but then the Covid-19 pandemic hit – seeing passenger numbers plunging to just 10% of pre-Covid levels in March, April and May, a situation mirrored in rail franchises across the UK. While building back up, the 15-year franchise is still at around 30% pre-Covid levels.
With revenues wiped out, UK Government Transport Secretary Grant Shapps effectively temporarily nationalised the franchises in England, with the Westminster Government taking on the revenue and risk, with train operating firms being paid fixed management fees for a sixmonth period, which expires this month with further support anticipated and an extension already agreed with Great Western Railway until next June.
In Wales a £60m investment was made into the Wales and Borders franchise by the Welsh Government.
Discussions are continuing between KeolisAmey and Transport for Wales on the nature of the contractor-supplier relationship going forward, with the six-month agreement due to end next month.
Regardless of its outcome, which will be driven by how Covid-19 will play out, for which there is yet little clarity, KeolisAmey insists it has no intention of walking away from the franchise, even if based on a simpler and potentially less profitable management fee model going forward. It could in theory hand the franchise back to the Welsh Government as the operator of last resort.
KeolisAmey is also delivering the next phase of the Welsh Government’s Metro project, with electrification of the Core Valley Lines into Cardiff and the City and Coryton Lines through the capital.
After lengthy negotiations, the rail asset was finally transferred by the UK Government to Cardiff Bay in
March, allowing work to start in earnest on the electrification project, which has a budget of £738m.
Chief executive of Keolis in the UK Alistair Gordon said on current passenger levels: “We are probably 30% at the moment.
“What we have seen across operations globally is that passenger numbers keep on increasing, and in places like China and France [ where Keolis operates rail networks] they are getting up to 60% now. Once the schools are back and, say, people are working three days a week in the office, then getting back to 70%-75% seems to be achievable, but we will have to see whether there is a new wave or new lockdown as we are not out of this yet.”
On the contractual shape of the franchise agreement going forward, Mr Gordon said: “We don’t see an option where we just walk away. There is a EMA [emergency measures agreement] in place in Wales, as in England and Scotland.
“The context of that is that they [governments] take the revenue risk and provide the cost risk as well, so provide all of our costs, and they just give us a small margin and a performance upgrade if we manage to perform well.
“That is the basis of the contract. In England it lasts until the middle of this month and in Wales until the middle of October.
“We are in discussions at the moment over what the new model will look like with Transport for Wales.
“It [current temporary arrangement] was put in place for six months as at the time people thought it would all be back to normal, or a vaccine would be available, and we would have everyone travelling, but it is clear now that the revenue will not be back to normal.
“So the franchise and grant agreements [the Welsh Government provides a public subsidy to support the franchise] we are in probably don’t work going forward.
“So we need to find a new mechanism. Wales is slightly different from the average franchise in that it is a big investment programme and a long-term one, so there is the operating contract, the transformation project and there is also managing the core Valley Line assets.
“However, Transport for Wales, Keolis and Amey are all still tied into the vision which is to transform the network, specifically the Core Valley Lines through electrification and bringing in the new fleet and doubling the frequency.
“That underpins the social and economic benefits in the south Metro area and it also brings a sustainable public transport that is cleaner and encourages people to come out of their cars.
“The prospect of that is not unaltered, but the whole world has now been in lockdown for six months.”
Chairman of Keolis in the UK, former Welsh Government Permanent Secretary Sir Derek Jones, reaffirmed the firm’s long-term commitment to the franchise and delivering investment across the Wales network.
Sir Derek said: “There is no way, I think, of going back to where things were. However, Keolis came here to do a really exciting job. We committed ourselves to Wales then and we moved our UK HQ here [from London to Cardiff ].
“So, despite everything that is going on, we do remain committed to Wales and playing our part in finishing the vision.”
Under its winning franchise bid (it was down to the last two with Hong Kong-based MTR) KeolisAmey had committed to delivering a number of new stations, from pre-Covid projected passenger revenues.
On whether those investments will now be realised, Mr Gordon said: “We would have to go through all of the plans that we were doing and the Welsh Government would have to look at the business cases for all of the investment they were making.
“I think the big priority will be on what we are trying to deliver in terms of additional capacity and frequency to start with.”
More than 2,000 staff, who previously worked for Arriva Trains Wales, transferred over two years to KeolisAmey.
Last month it announced it was recruiting 200 new train drivers across Wales to meet further increases in services, which also include those over the border in England.
This will add to the 800 train drivers already employed. Mr Gordon said: “We are continuing to recruit in the rail operations and we have got apprenticeship and train driver jobs available. So we still want to play an active part in delivering the Welsh vision and delivering for the Welsh community.”
On the asset transfer, and the Welsh Government continues to press the UK Government for the entire network in Wales to be devolved, Mr Gordon said: “It did take a long time, but the trigger date was the end of March and we managed to move it over before the end date and we managed to get things, like the inspection and the due diligence work, completed in advance.
“So we are quite happy where we are in terms of the programme.
“It was very complicated transferring the asset as it is the first time it has ever been done and lots of different agencies, like Network Rail, were all worried that it would set a precedent, so even though it was only a small part of the UK network that was being transferred it felt like it was the whole of West Coast mainline.
“Some services we have to buy off Network Rail as they are the only ones who can do it and all had to be done through commercial at arm’slength contracts so there was a hell of a negotiation.
“Then right at the last 10 days we were in a lockdown situation so there was a question if we could transfer safely, which we managed to do. I am pleased to say since we have taken it over the operations have not been impacted by our ability to manage the asset.
“There is a big electrification programme and all the packages of work have been gone through and we are quite comfortable where we are.”
KeolisAmey has under order new rolling stock in tram-trains from Spanish firm CAF and so called trimodes from Swiss-owned Stadler.
Mr Gordon said: “CAF and Stadler are still encouraging us that things are on track, but we will have to obviously manage this in how things are going to pan out over the next six months to a year, because we don’t know where they are in the different countries around building these new fleets.
“However, one of the big advantages of the way that the contract is set up, is that we don’t have a contract with Network Rail to go and put the wires up.
“It is operated by our ODP (operator and development partner) contract where we are in charge of the whole programme and we can slow things up and speed things up.
“So, hopefully, we can manage that and don’t have a doomsday scenario of trains with no wires or wires with no trains.”
While running new tram-trains on most of the Core Valley Lines, they will operate under heavy rail designation and not light rail.
While speeds are marginally faster than if under light rail designation, the tram-trains will not be able to travel as close together as trams.
Mr Gordon: “Light rail works very well for shorter distances than the Valley Lines and in the main city centres.
“When we looked at this network it was clear that a light rail on its own probably wouldn’t work.
“For the Core Valley Lines, especially with some of the constraints in having to be able to run freight in parts, heavy rail was really the only option.”
With four tram-trains an hour operating from the periphery of the Core Valley Lines network into Cardiff and back, while for Pontypridd there will be 24 (in and out) every hour, as its stands on the Coryton and City Lines, serving higher population densities than on the Core Valley Lines, the plans remain for just two services an hour.
MTR promised at least four an hour with trams in its losing bid.
On future extensions of the network, Mr Gordon said: “Extendability would all be light rail, as that is where you get your biggest bang for your money.
“On the Rhymney Line trimodes will operate.
“Running also on the Coryton Line and to Penarth too on the Vale of Glamorgan Line, they will be able to operate in three modes of diesel, battery (north of Ystad Mynach) and electric modes. That’s a configuration that’s never been seen before.
“So, is KeolisAmey confident they will ‘hit the ground running’ with no teething issues? Mr Gordon said: “We have experience of two-mode working, so I am absolutely confident that three mode will work while the life of batteries are accelerating exponentially.”
The franchise operates under the Transport for Wales Rail Services banner.
On Keolis’ relationship with Transport for Wales, Mr Gordon said: “It is a supplier-contractor relationship, but it really isn’t a problem for us [Transport for Wales Rail Services branding]. And if we don’t deliver, they have the right to penalise us.
“That is very similar to how we operate in Manchester and in London. If you go around any of the operations in London, you wouldn’t know there is a private operator there, as it is all under the umbrella of Transport for London.
“I think it is the right thing in Wales to have Transport for Wales operating it and you can do your integration with buses and parking and all of those modes.
“We are very used to that and don’t have a conflict of trying to put our name out anywhere. We are proud to be operating it and will say around the world we are operating the Transport for Wales network.”
Despite having around 11% of the UK rail network, when it comes to rail enhancement projects over the last few decades, Wales has received around only 2% of investment from the UK Government.
Wales, unlike Northern Ireland and Scotland, will not get a consequential for what could be an up to £100bn investment, from the roll-out high-speed rail from London to Birmingham and then reaching cities across the north of England.
Mr Gordon said: “It doesn’t feel like we have got an equal spend across the network and the country. Some of the focus can be on moving people around London or the highspeed lines.
“I think there needs to be investment in the railways and we need the infrastructure to move people around and I do think there is a big case for more investment into Wales.
“The Core Valley Lines is one example, but I hope that Wales gets more money. The centre of excellence that they are developing for putting a track- and train-testing facility [planned for the Neath Valley] shows the Welsh Government’s ambition to be a country that is underpinned by a good rail network and I hope that the investment will be seen from the UK Government.”
Sir Derek, who used to work in the Treasury before joining the Welsh Government, said: “It is a constant struggle, particularly for Wales, and it has sometimes felt like it is the last in the queue.
“On the other hand I think the Welsh Government is showing real strong ambition for rail infrastructure now.
“The current UK Government has spoken a lot about levelling up. Wales is a relatively poor country, but if we could match that ambition with some further long-term investment that would make a huge contribution to levelling up.
“You have got a public transport infrastructure that needs modernisation to support the economy and there is a strong case, but I wouldn’t be other than realistic about how tough the negotiations would be.”
Mr Gordon said that network in Wales was though improving, with far more to come.
He added: “Since we have taken over the network we have already increased the timetable two or three times and there are over 1,000 train services running daily now in Wales, which is the highest number there has been for a long time.
“We have now got that Wrexham to Liverpool service and we have introduced 40% more services on a Sunday, as Sunday services had been a real issue in and around Wales in people having the confidence to travel at the weekends.
“There are more modern fleets with the 170s with Wi-Fi, air conditioning and power sockets, and the same with the 153s.
“We have put smart ticketing around the network... so there has already been a huge investment over the last two years and that is before the Core Valley Lines transformation.”
While a matter for the UK Government, as a non-devolved franchise, Mr Gordon would like to see more services between south Wales and Bristol (Temple Meads).
There are currently just two an hour to Temple Meads compared to six between Manchester and Leeds. Improved connectivity is seen as being a key building block to develop the Western Gateway initiative of seeking to drive the competitiveness of the economies on both sides of the Bristol Channel through greater collaboration. Last month Transport Secretary Mr Shapps, when asked on increasing frequency of service between south Wales and Temple Meads, said: “Intuitively it sounds like the answer should be yes, but I would argue that we should always aim to increase transport and that should be road as well as rail.”
Mr Gordon said: “We would be delighted to run it if there was a new service specified. We are very much focused on delivering the Core Valley Lines and the timetable there. However, for Leeds-Manchester there are six or even seven trains an hour, when it used to be two or three. There does seem to be a lot of synergies there between Bristol and Cardiff and if you are to build on that you are going to need a better rail network.”