New entrant to rail express parcels market
Despite challenging operating conditions, Varamis Rail has secured an operating licence to run parcels trains.
AN operating licence has been granted by the Office of Rail and Road to
Varamis Rail for the operation of express parcels services. The first route is to be between Glasgow and Birmingham, followed by extension to London using the West Coast route. An East Coast service between London and Edinburgh, with intermediate hubs at Peterborough and Doncaster, is also proposed.
Social media posts indicate that there are two initial customers, a parcels delivery company and a supermarket operator, and recruitment is taking place for traincrew and control staff. The intention is to use repurposed electric units that have been displaced from passenger working, although the details are awaited.
Varamis will need to move quickly as the quantity of stored vehicles has been diminished by recent decisions to scrap a number of fleets, including the Class 365 100mph Networker Express units and the Class 360/2 Siemensbuilt vehicles displaced from Heathrow Connect services that were also rated at 100mph.
PARCELS IN DECLINE
Parcels activity was once a significant part of rail operations and merited the creation of an individual sector team which was required to make a profit on its operations that had previously been shown to be loss-making. Attempts to do this were unsuccessful and the business continued to shrink. In 1988/9 revenue at £126 million was 4.5% of total rail turnover, but this had declined to £78 million by 1993/4, which was 2.5% of rail income.
As a result of the contraction the loss recorded in 1988/89 of £13 million had risen to £26 million the following year and £37 million by 1991/2.
The market changed considerably in the 1980s as road-based operators were able to improve productivity by express deliveries as a result of the motorway building programme.
The long-standing collection and delivery service provided by BR was abandoned in 1981 as no prospect was seen of stemming losses, despite a number of large mail order customers. Much the same circumstances were evident in carrying Royal Mail parcels and that traffic was also given up in 1986, although letter mail operations were retained.
Another loss was the newspaper distribution business and eventually activity was reduced to the Royal
Mail letters contract and Red Star parcels business, which recorded an operating surplus of £9 million in 1989/90. That was to prove a high point as the business became vulnerable to recessionary pressure, with customers seeking cheaper ways of express parcels conveyance. The passenger operators who provided parcels counters at booking offices and brake van space on trains also sought to recover a greater element of the costs involved.
Early privatisation was proposed, but as costs had risen the result was that road conveyance was preferred for some routes as it eliminated the cost of dedicated staff at stations.
The business was the subject of a management buy-out in 1995, but was acquired by Lynx Express in 1999 and all station offices were closed in 2001 as the activity became wholly road-based.
New methods were needed to meet Post Office demands for faster letter mail transits and a new brand – Rail Express Systems – was created by BR to modernise the rail offer. A contract was agreed in 1993 that resulted in an overall investment of £150 million in the Railnet postal distribution network that provided 16 purpose-built Class 325 EMUs owned
by the Post Office that were delivered in 1995. As built, these units were dual voltage and could be hauled by both diesel and electric traction.
The use of Travelling Post Offices continued as part of Railnet on some routes, despite concern about the crash worthiness of the Mk.1 vehicles in use and safety of the sorting staff on board, but were withdrawn from the beginning of 2004 as the Railnet contract was not renewed. As a result, the Post Office switched to trunk road operations, although some rail services have remained, particularly at times of peak postal demand.
NEW OPPORTUNITIES
With the evident difficulty in the past of generating an operating profit by using rail for parcels distribution, successful market entry will depend on trading on a business-to-business basis rather than offering a retail product. There are new circumstances that give rail more opportunity as a result of a substantial increase in home shopping that has created demand for high volume transits between distribution hubs. Varamis is clearly focussing on this market.