Virgin races to the finish
By: Web Editor
There are four bidders for the new 15-year West Coast franchise. Since taking over in March 1997, Virgin Trains has eliminated entirely the old fleet and has, incredibly and commendably, managed to double the number of passengers carried since it started operations. Will Virgin manage to renew the contract? Mike Jones provides the remarkable story of how this enterprising company has flourished since the early days of privatisation.
INTERCITY operations on the West Coast main line were losing money at the time Virgin took control of the franchise on March 9, 1997. There had been a decline in the quality of the journey experience and a failure to improve timings, as an upgrade programme had been repeatedly delayed, although a short term measure of increasing maximum speed to 110mph had been implemented.
It was a measure in the decline of service standards that the East Coast main line electrification scheme included the provision of regular through trains between King’s Cross and Glasgow Central, which have now been largely removed given 125mph operations on the West Coast route.
A subsidy of £77 million was paid in the first year of private sector operations, but by 2002/3 it was anticipated that investment in a new train fleet would mean a premium could be afforded which progressively increased to £220m by the end of the 15-year contract in 2011/12. The ambition was that the best journey times of five hours between Euston and Glasgow would be reduced by an hour and 40 minutes cut from the duration of the journey between London and Birmingham New Street.
The failure of the British Rail Advanced Passenger Train project meant that the rolling stock in use was little changed from when electrification had been completed between Euston and Manchester/Liverpool in 1966 which had been extended to Glasgow in 1974.
Fleet strength in 1996
There were 48 train sets of locomotive-hauled Mk.2 and Mk.3 vehicles with electric motive power – made up of 16 of the original Class 86 type – which had been supplemented by 35 Class 87 locomotives built for the wiring extension to Scotland.
In addition, there was an allocation of 15 Class 90 machines that had been delivered from Crewe Works, from 1987, to replace the earlier non-standard types built as prototypes before the Class 86 design was finalised.
The fleet also included three High Speed Train formations, with the addition of a spare power car for maintenance cover which provided through services on the un-electrified route to Holyhead.
The much-rationalised Anglo-Scottish sleeping car services were not included in the franchised West Coast services as it had been considered that more effective marketing would take place if the trains were sponsored by Scotrail.
Original bid assumption
At the time the Virgin bid was made it was anticipated that 40 trainsets with tilt capability would be acquired, with 140mph operation made possible by radio-based train control that would eliminate lineside signals.
The improvement in infrastructure capability was to be completed by Railtrack – in a similar timescale to the delivery of the trains – but this proved to be far beyond the technical capability that was available.
The financial failure of Railtrack and its replacement by Network Rail, resulted in a significant downgrade in the planned capability of the route with the retention of conventional signalling that restricted maximum speed to 125mph.
Even the reduced specification saw costs spiralling out of control and work that had originally been priced at a little over £2 billion was ultimately to cost £9b by the time the project was completed in 2009.
There was little hint of the difficulties that lay ahead when Stagecoach acquired 49% of the Virgin Trains company in July 1998 – an ownership structure that has remained in place. The delivery of new Class 390 ‘Pendolino’ rolling stock took place from July 2002 to provide an enlarged fleet of 53 trainsets supplied by Alstom – although one of these units was later written off following the Grayrigg accident on February 23, 2007.
After a period when the franchise operated on the basis of a margin over actual results, a re-negotiated contract started on December 13, 2006 which maintained the length of the original 15-year agreement, due to end on March 31, 2012. This recognised that the prospect of a premium payment disappeared in the years of service disruption during the route modernisation work.
It was only in February 2009 that the Very High Frequency timetable was introduced, finally enabling the TOC to exploit the benefit of the ‘Pendolino’ trains with 11 services per hour operated at peak times.
Franchise - four companies bidding
Government intentions to change the nature of future franchise agreements has meant that competition for a new West Coast contract has been delayed and the new agreement will not start until December 9, 2012.
The pre-qualification process has produced three alternative bidders to Virgin – Abellio, First Group, and Keolis/SNCF – so there is competitive pressure to offer the best deal to take over the intended 15-year franchise.
There can only be speculation about the reasons for the delay in the bidding process, but it is clear that the original invitation to tender (subsequently withdrawn) saw little change in the much-criticised requirement for detailed delivery plans that have been a feature of past franchise arrangements which is contrary to expectations for simplified, longer contracts. There was also an absence of new objectives to achieve alignment between infrastructure provision and train operations described in the McNulty report.
The only concessions were that the train service can be altered to take account of changes in peak demand which includes variation to the stopping pattern. There is little flexibility in the choice of rolling stock as both the ‘Pendolino’ and ‘Voyager’ vehicles are subject to DfT guarantees about future use.
While the detailed delivery plans remain, there is no encouragement for bidders to develop a 15-year vision of how the route might be transformed by investment. West Coast stations are among the poorest in terms of national passenger survey ratings and, despite spending £9b on an operational upgrade, little was done to consider the passenger experience at stations.
Planning arrangements for the 2012 London Olympic Games were also a consideration in the contract timing. Originally, it was not viewed that work would be disrupted by a change in franchise ownership, if this was the result of the competition, but realisation of the very significant impact on transport services in the capital has brought about a change of view.
Previously, proposals for a two-year extension of the contract to March 2014 had been rejected by the Department for Transport as this would have an adverse impact on integrating the additional Class 390 rolling stock, currently being built into the timetable as the trainsets and vehicles became available.
Instead, a separate project management company was created to undertake the role with the much needed capacity being unavailable until the new franchise started.
The judgement not to allow an extension was brought about by the favourable terms to the operator of the current contract and a wish to maximise income for the DfT from premium payments under a new agreement, either with the incumbent or another company.
After negotiation, it was agreed with Virgin that there would be an eight-month contract extension on terms that represents value for money – essentially an agreed level of financial return over the cost base.
For this period, a premium of £103m is to be made, an annualised figure of £149m not so far away from the projection made 15 years ago. It is subject to the ‘cap and collar’ regime, in that an 80% rebate will be offered if the revenue forecast fails to meet expectations which de-risks the target of 10% growth in 2012.
A benefit of the agreement is that the additional ‘Pendolino’ trainsets and coaches will be introduced earlier than had been the intention following criticism of an unnecessary delay, given after severe overcrowding at peak times. This enabled the first of the new Class 390 trainsets to enter service in July 2011, being deployed on a Birmingham-Scotland diagram that allowed the release of a Class 221 ‘Super Voyager’ to work in multiple on the busiest services on the North Wales Coast.
The new timetable has allowed the journey time between London and Glasgow to be reduced to 4hr 10min and elsewhere three trains per hour are now provided between London and Manchester with running times of 2hr 10min.
In a complex re-mapping process, the former Virgin CrossCountry’s Birmingham to Edinburgh service was transferred to operations on the West Coast and a regular interval service adopted for operations between London and North Wales that removed the need to provide locomotives to haul ‘Pendolino’ sets over this route. As a result, 21 ‘Super Voyager’ trainsets were transferred from the original CrossCountry fleet to provide the necessary rolling stock for these services.
Huge passenger growth
The speed up of services has transformed demand and in the 2010/11 financial year 28.9 million passengers were carried which is a significant increase from the 13.2m users at the time the franchise commenced operation.
The transfer of services operated by the ‘Super Voyager’ trains means this is not strictly a like-for-like comparison, but it became clear that rolling stock capacity was insufficient for future growth and a decision was made by the DfT to enhance the ‘Pendolino’ fleet by the addition of four new 11-car sets and 62 additional coaches to lengthen 31 of the trains from 9 to 11 coaches leaving 21 sets running as nine-car formations.
This was a judgement that was contrary to the opinion of Virgin Trains who sought authorisation for sufficient vehicles to be built to allow all trainsets to have standard 11-car capacity. This was also identified in the Network Rail Route Utilisation Strategy as a decision that will cause overcrowding as passenger volume grows and bring day-to-day operational problems in the future, particularly at times of service disruption when rolling stock diagrams are subject to short-term change.
The timetable currently requires 47 of the 52-strong fleet to be available for service and there is also a standby locomotive-hauled Mk.3 set that is rostered for use on Fridays and also provides capacity for supplementing services to cater for demand spikes in connection with special events.
The ‘Pendolino’ fleet is maintained by West Coast Train Care (an Alstom subsidiary company business) with depots at Wolverhampton (Oxley), Manchester (Longsight), and Glasgow (Polmadie). Servicing work is also carried out at Wembley.
The commissioning of new trainsets and the lengthening of existing formations is taking place at a new Alstom facility at Liverpool (Edge Hill). The ‘Super Voyagers’ are maintained by Bombardier at the Central Rivers depot, near Burton upon Trent.
Virgin Trains is well rated by passengers, with the spring 2011 National Passenger Survey finding that 90% of users were satisfied with the service and just 3.5% of users expressing dissatisfaction about their journey experience. The figures would have been higher but for poor ratings about the facilities and services provided at stations, including the availability of car parking and the tariff charged.
West Coast stations were among the poorest in terms of their condition and standard of amenities, as identified in the Green/Hall ‘better stations’ report which specified the standards that passengers should expect at main line stations. Hopefully, this will improve as the Government has recently approved an investment of £390m in station improvements as part of its stimulus package to increase employment and growth in the economy.
WC Route Utilisation Strategy
For the future, Network Rail published a Route Utilisation Strategy (RUS) for the route in July 2011. These are documents that identify gaps between expected future demand and the capacity of the network to meet the needs of train operators.
The timeframe studied was until 2024 – when it was thought that HS2 would open between London and the West Midlands to allow long distance passenger services to use the new infrastructure to reach population centres served by the conventional route, although the plan now is for opening in 2026.
There is the expectation that the core service between Manchester and Euston will attract between 54% and 61% more passengers by 2024, a figure that looks entirely reasonable given how much demand has grown since the introduction of the 2009 timetable.
In 2009/10 earnings from passengers on the flow reached £103m, the largest point-to-point revenue on the national network. By comparison, journeys between London and Leeds saw income of £79m and Birmingham £60m.
Of interest was the legacy of uncompetitive service quality for the Glasgow market which saw earnings of just £23m, a long way below the East Coast figures for Edinburgh that amounted to £37m. The RUS lays out plans to cut Anglo-Scottish journey time services by reducing the number of station stops and increasing the frequency of Manchester services to four trains per hour at peak times.
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