“High standard”
Virgin Trains East Coast MD DAVID HORNE tells PAUL STEPHEN how the franchise is working hard to deliver on its customer service and investment commitments, amid claims of declining standards
Virgin Trains East Coast MD DAVID HORNE reveals the company’s plans to deliver on customer service commitments.
When Virgin Trains East Coast emerged as the winning bidder for the eight-year Intercity East Coast franchise in November 2014, it was with a bid built on growth.
Commencing in March 2015, the new operator promised growth in the number of services it would provide, growth in the value of premium payments it would make to Government, and (critically) growth in the number of forecasted passengers it would carry.
On an Anglo-Scottish route where more than 90% of travel is discretionary (and not made up of commuter flows), VTEC had based its sums on tempting passengers away from the buoyant market for air travel between London and Edinburgh. It was also looking to capture a strong but latent demand for its services elsewhere on the East Coast Main Line, a demand that was widely assumed to have been kept away by a lack of capacity.
The answer therefore appeared quite simple to VTEC. It promised to operate an expanded timetable by running extra services to destinations in England and Scotland (including Edinburgh and Sunderland), as well as additional services to new destinations such as Huddersfield and Middlesbrough.
It also pledged £140 million to refresh the tired interiors and improve the reliability of its inherited fleet of Class 91/Mk 4s and High Speed Trains, while also delivering a range of station enhancements. A host of new technology was also lined up to improve the customer experience, including a new website, smart apps, universal provision of WiFi and on-board media streaming. However, the pièce de résistance was a fleet of 65 new Azumas ordered from Hitachi. It has now been confirmed that these trains will enter service from December 2018 ( RAIL 837), offering more seats and helping to bring down journey times through its superior technical performance (such as London-Edinburgh in less than four hours). These promises will have a combined effect of providing improved facilities, faster journeys and a 50% increase in capacity (equivalent to 12,200 extra seats) by 2020. Based on VTEC’s projections for revenue growth, this has enabled the
operator to commit to delivering £ 2.3 billion in premium payments between 2015-23.
All well and good, but VTEC was also going to be heavily reliant on Network Rail and its infrastructure to fulfil these ambitions. This ultimately led to the operator’s majority stakeholder Stagecoach deciding to return to the negotiating table with the Department for Transport earlier this year, in order to discuss the ongoing commercial terms of its franchise.
The announcement was made on June 28, in the company’s full-year financial results for the year ending April 29. These revealed that VTEC’s profit and revenue was lower than anticipated, while warning that the “current contractual arrangements give rise to an onerous contract”.
Officially the blame was laid with “macroeconomic and external factors beyond our control”, but namely it was uncertainty over the delivery of planned enhancements (such as grade separation at Werrington and the addition of a fourth track near Peterborough) as well as the creaking condition of infrastructure on the East Coast Main Line. This includes the route’s overhead line equipment, which is nearing the end of its design life and which has historically been susceptible to damage caused by high winds, owing to the method of construction chosen in the 1980s.
As well as preventing VTEC from making full use of its track access rights in the second half of its franchise ( by not providing the increased capacity that is needed for planned extra services), the failure of OLE and other ageing Network Rail assets is proving to be a continual thorn in the side of VTEC’s target Public Performance Measure of 90%.
Negotiations are ongoing, but meanwhile Stagecoach says that VTEC is continuing to meet contractual payments to Government that are estimated to be 30% more than those made by previous franchisee Directly Operated Railways (DOR).
In 2009, DOR had stepped in to run services on the ECML on an interim basis, after National Express East Coast had handed the keys back to DfT due to the financial pressure of falling revenue as the UK economy entered into recession. NXEC had itself sought talks with the DfT for financial assistance which was ultimately unforthcoming.
Drawing on the past experience of NXEC has inevitably led to speculation in some quarters that VTEC could choose to do the same thing, should it be unable to renegotiate its franchise terms with the DfT.
This includes RAIL columnist Philip Haigh who wrote in RAIL 835 that “quality is crumbling” on VTEC services before concluding that “I sincerely hope it doesn’t follow the depressing path that National Express East Coast took a decade ago, when it found its financial burden growing”.
Specifically, Haigh pointed to his experiences on August 31 when catching the 1830 from King’s Cross, which was delayed due to what he described as the operator’s shortage of stock.
He also referred to a growing number
We’ve already invested a pretty significant figure, and that’s in addition to paying 30% more back to DfT per month than the previous franchise. David Horne, Managing Director, Virgin Trains East Coast
We have track access rights for additional services, we are getting the trains, and now we just need to get on and make it all happen. David Horne, Managing Director, Virgin Trains East Coast
of Tweets complaining about on-board service (including a lack of staff and hot food), while also highlighting several deficiencies in VTEC’s newly revamped website, including reported difficulties in modifying existing bookings and cyclists finding that they are unable to book their bikes onto trains.
RAIL put these reported issues to VTEC Managing Director David Horne, and the wider suggestion that the operator’s lack of profitability was leading to standards beginning to slip.
“We are a Virgin company and people expect a high standard of service,” he replies.
“It [slipping standards] would be absolutely the wrong thing to do in terms of this business, when you have so much revenue that is discretionary. People generally aren’t travelling for work, they are travelling on business or for leisure and they have the choice of flying or jumping in their car. That is why we can’t let standards slip, and which is why we’re so incredibly focused on our improvement plans.”
Horne confirms to RAIL that £ 74m has so far been invested of the £140m committed at the start of the franchise for improvements, despite VTEC only being just over a quarter of the way through its eight-year term.
He also says that the operator is on track in the delivery of several other improvement pledges: “We’ve already invested a pretty significant figure, and that’s in addition to paying 30% more back to DfT per month than the previous franchise, so it’s fair to say that it’s been a busy two and a half years in investment terms. The strategy was always to do it in two key phases - the first three years when you have the existing trains and stations, and then the second phase comes with the new [Azuma] trains.
“We’ve done several things ahead of plan, and introduced some new services ahead and above of those envisaged by the franchise. For example, in December we’re launching an 0440 weekday service from York to London by extending a service which originally started in Newark. The return working is the 2257 from King’s Cross, which again wasn’t envisaged at all.
“From December, we’re going to put another 24 trains in the timetable on Saturdays when the franchise plan was to do it in May 2020, so you’ll have a six-day-a-week standard timetable. We’ve been through a process of looking at where we can enhance services and, so far, it has paid off.”
Despite Stagecoach’s profit warnings for the franchise, Horne reports that VTEC’s market share of travel between Edinburgh and London (at the expense of the airlines) has increased since 2015 from 30% to 44%.
He also reports that passenger numbers rose by 8% between London-Edinburgh in the last financial year, and 3% across the entire franchise, vindicating VTEC’s assumption that providing extra capacity would lead to growth.
In terms of customer satisfaction, he says that VTEC’s own customer survey score is now three times higher than in 2015, while the latest National Rail Passenger Survey compiled by Transport Focus gave VTEC an overall satisfaction score of 91% in spring 2017, placing it two percentage points above the average score for long-distance operators.
The conversation turns to Philip Haigh’s specific allegations, with on-board food and trolley services the first to be scrutinised. Horne replies that a new on-board structure was introduced in March which has taken time to bed in, but says it will ultimately provide a higher quality of customer service.
“87% of our customers are in Standard Class, so we wanted to ensure that we had a structure on board which provided that focus and enabled us to run a Standard Class trolley on all of our services.
“Over the summer weeks we’ve had some teething challenges getting it up and running, and we’ve been going through a process of re-training our train managers to give them new customer service skills. The previous role was very operationally focused, and we’ve created a role where that is retained but they are also responsible for looking after the customer service on the train.
“We’ve had some crew shortages over the summer that has had an impact on some of the service delivery which Philip Haigh has picked up on, but it’s not deliberate costcutting. It’s just a transition from the previous structure which has been in place for a number of years.
“In the past six weeks, we’ve taken on 40 new on-board hosts to fill the gaps we had in the roster, and we’re hoping that over the key autumn/winter months we will now get to where we are looking to get to with a trolley always in Standard Class, the buffet always open and at-seat service in First Class.”
In terms of VTEC’s website, Horne explains that its revamp was guided by feedback gathered from passengers, and that it is still in development. This should mean the restoration of all its previous functionality.
“There’s been a lot of comment on Twitter about the website, but we try and be really objective about how we look at it. We send emails to 2,000 customers a day asking for their thoughts, and 80% of them have come back and said to us that the new website is better than the old one.
“Yes, it’s fair to say that at present we have removed the functionality that Philip Haigh refers to, but we’ve tried to build a website that appeals to the majority. And from the feedback we’ve received, we’re confident that we’ve done it successfully.
“We’ve made it easier to navigate the site in the way that people are accustomed to with other mainstream websites, and made it easier to find fares and buy season tickets, which the old site couldn’t do.
“The new website has also enabled us to launch M-tickets and the Seatfrog app [which enables passengers to bid for an upgrade from Standard Class to First Class], which we would not be able to offer without launching a new website.”
Horne adds: “We’re currently going through the development cycle, and restoring the previous functionality is on the development roadmap for the new website. There are only seven TOCs that offer online cycle booking, so it is not a universal feature, and in the meantime, we’re telling people where they can go to book. There has been no dip in usage figures so we’re really pleased with how users have responded so far.”
As for the apparent stock shortages on August 31, Horne says it was a simple matter of infrastructure failures.
He adds: “The fact is we have more rolling stock than we started with. We have leased spare HST sets from East Midlands Trains to resource some additional services, and two Class 90s to provide resilience and enable us to take a Class 91 out of service to do reliability modifications.
“The Class 90s have worked 796 services this year [as of September 29], so it’s wrong to say we have insufficient stock as they have prevented cancellations that would otherwise have resulted.
“As for August 31, we had all the trains in service that were due in service, and we weren’t running short of trains that day. What happened was a broken rail at Retford, a broken-down freight train and two level crossing failures which inevitably meant that stock was out of position.”
Finally, RAIL turns back to the subject of the continuing renegotiations with DfT. With VTEC delivering on its franchise commitments so far, and in some cases exceeding them, Horne praises NR for work it has completed at the southern end of the ECML to enable the introduction during 2018 of Thameslink and Azuma services.
Agreement will now need to be reached on the remaining infrastructure works, if VTEC is to fulfil the potential these new trains and indeed the franchise have to offer.
“We are going to have to go back to the drawing board in some degree, to look at what timetable we can now run, because we’re going to have the trains but not the infrastructure. NR has done the core works to enable us to launch Azumas on all of our existing services, but we now have a delay before we can launch some of the additional services that in the franchise plan were to start in May 2019.
“The power supply at the northern end of the route is still work in progress, and we need to see the dive-under at Werrington and an additional track between Huntingdon and Woodwalton, which is planned for delivery at the end of 2020. We need that before we can run the extra services that we have track access right for, so clearly we are looking for NR to press on with that so we can make full use of the trains we’re getting.
“It’s fair to say that PPM is below target, and that’s driven by some NR-attributable delays being worse than forecast, such as the dewirements which we are getting roughly once every eight weeks.
“We have track access rights for additional services, we are getting the trains, and now we just need to get on and make it all happen.”