In the context of a long franchise on a very high revenue route the difference between Virgin's "realistic bid" and First's "overbidding by miles" isn't that huge surely?
I've picked on this, but there are plenty of other comments about the bids on the last few pages.
First have put in a revenue growth of 10.4% a year on average. This is made up of 5.8% increase in volume and 4.6% increase in yield (price). Yield could, and probably does, include a better yield management system for Advance Purchase than Virgin currently use, and some changes such as have already been suggested on these boards, such as Super Off Peak/Off Peak. They are talking about reduced anytime fares and reduced first class (not surprising because as I've pointed out on these boards before, it has died in the recession). Anyway the 4.6% looks extremely achievable given that they have RPI+1% increases every year and RPI+3% for the next two. It's the 5.8% that looks rather heroic. Based on the Premium on the First Bid they ramp up seriously in Years 3-6. A cynic might suggest that Years 1 & 2 they spend getting bums on seats, and then the price rises start.
To put this into context, VRG bid for 8.5% growth. I believe the other bidders were in the same ballpark, but VRG had greater growth in the current year, which as they have pointed out, they should have, given they could launch things 4 months earlier. Their Yield would not have been a lot different IMO, which makes growth around 3.9%, meaning First was around 50% higher. That's a lot of bums to put on seats.
Looking at what Stagecoach have said about the numbers in the VRG bid, they are at least as back-end loaded as First, probably more. The fact is that these bids are decided on
NPV of Premiums. That means money in Year 3 is worth more than money in Year 13. At least part of the difference in the NPV seems likely to be down to First growing so fast in Years 3-6.
All the bidders were offered 6-car Pendos, and I'm told that three of them took up the offer. E-voyagers were more expensive. There is no other suitable rolling stock, as only tilting trains are allowed to travel at 125mph, and the Timetable would not allow for slower trains on the line.
First almost certainly would cut down the shop - they intended this if they had won XC - and the capacity improvement is substantial. It's also true that the majority of people prefer an at seat service. Such a service would require extra staff, although I would bet that First cut down on staff in First Class, so the net change might be quite small.
21 Gatelines is interesting. WC only has 17 stations. Are DfT including BNS in the 21? I'd say yes, and then there's Euston, Manchester, Glasgow. MK is already gated by LM; Motherwell by ScotRail. That's pretty high coverage. I agree that chances are that extra staff here may be offset by decreases elsewhere. HQ is almost certain - I've seen the numbers compared to First TOCs, and I reckon at least a 20% reduction. It's hard to see where big reductions elsewhere could come from, with them running additional services.
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Does anyone know if Branson/Virgin are going to be releasing details of their bid into the papers today as they mentioned they would earlier?
Already done, on the Stagecoach website. Whether they release more details remains to be seen.
