Speculation: How could Hull Trains and Grand Central be saved?

[Ianno87]

The Government can't specifically support OA - it's illegal for them to do so on both Competition and Procurement grounds. The fact that it directly contracts competing services is problematic for both them and the OA operators. if they weren't so involved, it would have been much easier for them to subsidise the operation in a pseudo EMA or a direct contract. it's been looked at in detail by both the DfT and the OA owning groups.

Hull Trains is not primarily abstractive, never has been and when GNER tried to claim it was in the High Court, they had to withdraw that charge on the first day of that infamous court case against the ORR, which they lost, badly.

People on this forum are fixated by ORCATS. Inter Available revenue is now such a small proportion of ECML (& WCML) flows so ORCATS raiding is very much a thing of the past - getting your key flow revenue up to 80% - 90% Dedicated is now the name of the game. If you are starting an OA operation now you have to compete on price and service offer otherwise you will go bust big time and quickly. Connecting flows tend to be IA but even with those there is an increasing tendency to do joint tickets to maximise Dedicated revenue and cut out the ORCATS leakage.

Both GC and HT have been pointed into the direction of extending their existing TAA's to cover their Covid related losses. GC have a one year extension application in with the ORR and HT have a three year extension application going through the system now. Both are expected to be granted.

During the great toilet roll shortage / supermarket ransacking of March 2020, the government did suspend the usual competition laws to permit supermarkets to coordinate supply chains, so there is precedent of sorts.

In the Open Access sense, could be argued as protecting competition in the long term.

 

[Clarence Yard]

It's easy for them to do that because they don't run supermarkets but they effectively do run railway companies, that's the problem. As I said, all the possible options have been looked at by both sides.

 

[tbtc]

As for clogging up busy mainlines, despite 16 Open Access trains each way per day (7 Hull/Beverley, 5 Sunderland, 4 Bradford) on the ECML - the equivalent of 1 an hour, LNER seemed to find the room for an extra 1.5tph (a Newcastle and half a Middlesbrough) between the 2016 timetable and the 2020 (now 2021/22) timetable

It may be roughly one train per hour but there's not been a dedicated hourly path for OAOs (they've taken different paths in different hours), so integrating them with LNER would allow the timetable to be run more efficiently

The Grand Central West Riding service has been a success and would be sadly missed if it disappeared. LNER would not be interested in taking this service over

On what metric has the West Riding service been a "success" though? Especially if you're saying it's not successful enough that LNER would alter any of their plans to fill in the gaps, were it to be scrapped?

I completely agree that GNER/LNER should not just inherit the fruits of others' labours, especially as they ignored these markets or served them infrequently. They haven't earned it.

Hull Trains, and GC to a lesser degree, took risks, build businesses and brands, differentiated - this should be rewarded. New markets have been served, existing mainline stations better served (Grantham, Retford, Stevenage even) - exactly what open access was intended for. Innovation.

The same is true on other main lines to an extent - e.g. the Midland Main Line hasn't had any real competition but the TOC have started up services to new destinations (e.g. London to Burton, Matlock, Barnsley), increased frequencies etc - it's not unique to OAOs

However GNER/ NXEC/ VTEC didn't have a fresh sheet of paper to re-organise the ECML timetable due to OAO being in the way (but did introduce direct Lincoln/ Sunderland services, increase the Harrogate service, more services to existing stations too)

 

[bluenoxid]

It's easy for them to do that because they don't run supermarkets but they effectively do run railway companies, that's the problem. As I said, all the possible options have been looked at by both sides.

I did think that the simplistic here’s funding, give us 30% of your business was going to have been looked at.

 

[Starmill]

I gave some ideas in another thread. I was rapidly shot down. I agree they weren't terribly likely, because they involved the government contracting the two companies to provide services on behalf of LNER or Northern, or the government directing another of their contractors to hire stock and crew commercially from HT and GC. In the short term there aren't really any other options. They just have to hope that by November they'll be able to operate at break-even.

They could also try to renegotiate the leases on their trains, or ask staff to accept voluntary pay reduction. They may be able to make some staff redundant and scale back.

It's easy for them to do that because they don't run supermarkets but they effectively do run railway companies, that's the problem. As I said, all the possible options have been looked at by both sides.

I think the more accurate description is that the government doesn't want the cost and the risk associated with an attempt. Not that it's physically impossible. Eventually you reach the point where the government could just publish a new open competition for a temporary service. If GC and HT don't submit the best value for money bids, they probably didn't deserve taxpayers' help.

Even if the current firms no longer existed the government could still procure new, similar, replacement services, which would attract bids convenient to hoover up the staff and assets of the two.

I'm not too surprised that the government doesn't consider saving either to be absolutely essential. It would however be good for publicity.

 

[43096]

In the Open Access sense, could be argued as protecting competition in the long term.

How are they any different to other "open access" transport businesses - say National Express or Megabus?

Both GC and Hull are part of much bigger groups - why should they get any more support than any other business in the current situation. It's not like they are essential services.

 

[si404]

It may be roughly one train per hour but there's not been a dedicated hourly path for OAOs (they've taken different paths in different hours), so integrating them with LNER would allow the timetable to be run more efficiently

It doesn't need a change of operators to make it that the Open Access services have a regular path each hour. It might make it easier, sure, but it's not necessary.

That they can run on different paths in different hours just furthers the point I was making that there's spare capacity on the ECML and they aren't hindering capacity.

It's not like they are essential services.

I can't see a world where had Hull Trains/Grand Central not been in the way that the services they run (at least to Sunderland and Hull) wouldn't have been services the ICEC franchise would have had to provide, just like the Middlesbrough, Bradford, Harrogate and Lincoln services.

 

[Starmill]

To remind you: the daily LNER service has long been effectively a reverse ORCATS raid on Hull Trains.

They run that one train because they're contracted to, not because of this. Also it has been running for longer than HT have existed, so I don't see how this could possibly fit.

 

[Starmill]

Evidence suggests that Open Access has had the effect of growing the market overall, and actually benefitting the revenue line of the franchised operator.

What evidence?

 

[Starmill]

Not the way ORR see it. Firstly, it is more aimed at extracting demand from air.

Secondly, I seem to recall (may be mis-remembering) they were proposing *not* to recieve a slice of ORCATS? i.e. you could only buy their own tickets, not inter-available ones?

Firstly ORR's test is frequently criticised given it allows applications where far more than 50% of forecast revenue is abstracted. Secondly this point wasn't ever clarified I don't think. One press release suggested there would be no dedicated flexible tickets, but that doesn't necessarily mean they won't take their cut (such peanuts as it will be) from the intetavailable tickets. Doed anyone know for sure their thinking, bearing in mind it's still a long time until their proposed launch?

 

[Bletchleyite]

They run that one train because they're contracted to, not because of this. Also it has been running for longer than HT have existed, so I don't see how this could possibly fit.

In any case, how many people travel on HT with interavailable tickets, which would be subject to any ORCATS raid? I'm betting almost nobody, because their dedicated ones are much cheaper.

Even Virgin's attack on WSMR wasn't a reverse ORCATS raid - it was genuine competition - they won by providing a faster service (at a higher price, too), not by nicking fares revenue.

 

[Clarence Yard]

I gave some ideas in another thread. I was rapidly shot down. I agree they weren't terribly likely, because they involved the government contracting the two companies to provide services on behalf of LNER or Northern, or the government directing another of their contractors to hire stock and crew commercially from HT and GC. In the short term there aren't really any other options. They just have to hope that by November they'll be able to operate at break-even.

They could also try to renegotiate the leases on their trains, or ask staff to accept voluntary pay reduction. They may be able to make some staff redundant and scale back.
I think the more accurate description is that the government doesn't want the cost and the risk associated with an attempt. Not that it's physically impossible. Eventually you reach the point where the government could just publish a new open competition for a temporary service. If GC and HT don't submit the best value for money bids, they probably didn't deserve taxpayers' help.

Even if the current firms no longer existed the government could still procure new, similar, replacement services, which would attract bids convenient to hoover up the staff and assets of the two.

I'm not too surprised that the government doesn't consider saving either to be absolutely essential. It would however be good for publicity.

You can reprofile your leases (and on here I cannot get into whether that has actually happened!) but all that does is reprofile your total lease costs - there are no reductions on offer, especially if the stock has the potential to be leased elsewhere. Scaling back staff on Hull Trains is also hard because the vast majority of their 134 staff are operational.

I will re-iterate the point again. It is the legal position the gives the DfT issues, not the costs - they are putting up huge sums of money into franchised operations at the moment and compared to them, GC/HT together would be a very small drop in the ocean. Procuring replacement services "just like that" when they don't operate them already is also legally problematic for them - in other countries it is easier, thanks to the way they have set up their public service procurement laws and procedures and some OA operators in Europe are benefiting from this approach. The DfT also open themselves up to legal claims from the former operators, who will allege, with some justification, discrimination and predatory behaviour.

Given the way the EMA's are going and the level of control now being exerted by the DfT, getting an extended TAA is probably the best course for OA operators. The key issue here is how the public return to both GC and HT and whether this will match the amended business plans now with the ORR as the justification for obtaining those TAA extensions.

 

[Metal_gee_man]

How are they any different to other "open access" transport businesses - say National Express or Megabus?

Both GC and Hull are part of much bigger groups - why should they get any more support than any other business in the current situation. It's not like they are essential services.

100% in agreement, if the parent companies Arriva (GC) and First (HT) want to keep running they should find a way of funding this themselves, like any arm of a group who are going through difficulties it's a matter of do you want to loan that arm more money and will you get it back
P&O ferries is a good example DP World have chucked money at it because its a good viable business
Go Outdoors just went into administration, but their parent company JD Sports just threw another £75m at it rebuying it in a pre-packed deal because its a good deal
Sadly the numbers HT and GC transport aren't going to appear overnight, the numbers will have to surge beyond their previous levels to pay back any loans from their parent companies and accordingly don't make good business sense, hence them going cap in hand to the UK Government.

This a barrier already but add in the competition problems because of LNER and state aid for a rival business to LNER its a non starter.

Fold the company, sell/transfer the assets to LNER and TUPE the staff across. Then reactivate the paths and services when the demand is proven and that's when you hire in the rolling stock from the ROSCO.

It's brutal, it's a harsh lesson, but it emphasises to new entrants in the OAO market beware because there is no safety net, only take on the franchise system if you know categorically you can consistently make money.

 

[Clarence Yard]

The only real assets are the trains and they would just be returned to the ROSCO. Any future user would have to negotiate a new contract for them.

The staff wouldn't straight TUPE - it would be a redundancy (and recruit) situation for any new user, who would also have to apply for new TA rights. If the company was sold as is, then all the contracts & liabilities would go with it but, most importantly, the TA rights would remain. But in the current climate, I'm not sure that anyone would want it.

The comment about taking on franchised operations is spot on. You have to have the pockets to cope with adversity. Just after HT started, GB Railways had to deal with the Gauge Corner Cracking fiasco and what that did to the finances so you just have to get on with it, if you want to make those future profits.

 

[35B]

In any case, how many people travel on HT with interavailable tickets, which would be subject to any ORCATS raid? I'm betting almost nobody, because their dedicated ones are much cheaper.

Even Virgin's attack on WSMR wasn't a reverse ORCATS raid - it was genuine competition - they won by providing a faster service (at a higher price, too), not by nicking fares revenue.

I used HT regularly on a season ticket up to Covid, turn and turn about with LNER. And I was by no means the only one. And, going back some years now (Pre Eureka!), as part of a through journey from Newcastle to Grantham, for the leg south of Doncaster.

 

[35B]

100% in agreement, if the parent companies Arriva (GC) and First (HT) want to keep running they should find a way of funding this themselves, like any arm of a group who are going through difficulties it's a matter of do you want to loan that arm more money and will you get it back
P&O ferries is a good example DP World have chucked money at it because its a good viable business
Go Outdoors just went into administration, but their parent company JD Sports just threw another £75m at it rebuying it in a pre-packed deal because its a good deal
Sadly the numbers HT and GC transport aren't going to appear overnight, the numbers will have to surge beyond their previous levels to pay back any loans from their parent companies and accordingly don't make good business sense, hence them going cap in hand to the UK Government.

This a barrier already but add in the competition problems because of LNER and state aid for a rival business to LNER its a non starter.

Fold the company, sell/transfer the assets to LNER and TUPE the staff across. Then reactivate the paths and services when the demand is proven and that's when you hire in the rolling stock from the ROSCO.

It's brutal, it's a harsh lesson, but it emphasises to new entrants in the OAO market beware because there is no safety net, only take on the franchise system if you know categorically you can consistently make money.

There’s truth in that, but they have also been stopped from earning by an act of government. That is not in the normal run of business and while I understand and agree with CY’s analysis of the competition and procurement aspects, if I were at one of the OAOs, I would also be keeping a close eye on the actions of government for any signs of prejudiced behaviour due to DfTs historic antipathy to open access.

For what it’s worth, I do support them and for both GC and HT, see their success as a rebuke to the narrowness of the franchising process, making a viable business out of routes that franchising didn’t see value in.

For those who plead that they are abstractive, they have passed the legal test and are therefore entitled to run. I also suggest that “abstraction“ in this context is not far different from considering network benefits back in the BR era, and the role of contributory revenue argued for protecting lines from closure.

 

[Ianno87]

What evidence?

John Nelson's 'Losing Track' book quite convincingly asserts it (I'd happened to read that exact page minutes before).

Has LNER/VTECs/GNERs revenue every actually demonstrably gone *down* specifically due to Open Access, as opposed to wider economic factors?

It may be roughly one train per hour but there's not been a dedicated hourly path for OAOs (they've taken different paths in different hours), so integrating them with LNER would allow the timetable to be run more efficiently

It kind-of is an hourly path; the xx27 or xx57 path departing King's Cross for Grand Central (flighted in front of the xx30/00 LNER), which becomes xx18 or xx48 when making time to stop at Grantham and Retford and keeping roughly the same path at Donny.

 

[Energy]

Even Virgin's attack on WSMR wasn't a reverse ORCATS raid - it was genuine competition - they won by providing a faster service (at a higher price, too), not by nicking fares revenue.

To be fair WSMR took forever to get to London so most people would just change in Chester or Crewe to save an hour or so.

 

[Ianno87]

Both GC and Hull are part of much bigger groups - why should they get any more support than any other business in the current situation. It's not like they are essential services.

You could argue that it isn't "essential" for Leeds to get 2tph via LNER, so should be reduced to 1tph.

Hull / Sunderland could reasonably argue that their Open Access services are "essential" to recovery of their cities' respective economies and social cohesion; particularly as this has been supported for the last 10-15 years by Open Access at zero cost to the taxpayer.

 

[ainsworth74]

Sadly the numbers HT and GC transport aren't going to appear overnight, the numbers will have to surge beyond their previous levels to pay back any loans from their parent companies and accordingly don't make good business sense, hence them going cap in hand to the UK Government.

Will they? Both are (or were) profitable businesses in their own right. Grand Central's account the year ending December 2018 show a profit of £8.2m (they usually publish their accounts around this time of year so we may found out soon how they did through to December 2019 shortly) whilst Hull Trains accounts show a profit for the year through to March 2019 of £1.1m (down from £2.7m the year before as this takes in the period when they had horrific train availability).

Looking at that, certainly for Grand Central, a return to levels of usage around the same level as they were before the pandemic leaves plenty of headroom to pay back the owning groups support. Hull Trains are in a stickier position but most of that is down to the failure of their old fleet of trains and even then they were making money which could be returned to the owning group.

I suppose we're basically looking at where the tea leaves are left in the bottom of the mug but still I'm not sure that, long term, either operator would be unable to make good the any money spent to keep them afloat by their owning groups.

 

[si404]

it was genuine competition - they won by providing a faster service (at a higher price, too), not by nicking fares revenue.

Virgin won by rigging the legal structures and market so that WMSR could never be allowed to provide genuine competition to them. It was good that WMSR managed to get token Shrewsbury and Wrexham services out of Virgin in the end, but that's all they could ever do with the system - gamed by Virgin - leaning so heavily against them.

Say it was a 100m dash they were competing in - Virgin had rigged the rules so that WMSR had to go the long way round on the track.

Or if Boxing, Virgin cut both their arms off before entering the ring.

I agree that Virgin didn't kill them by stealing their fares revenue, but they definitely didn't compete genuinely.

 

[35B]

Virgin won by rigging the legal structures and market so that WMSR could never be allowed to provide genuine competition to them. It was good that WMSR managed to get token Shrewsbury and Wrexham services out of Virgin in the end, but that's all they could ever do with the system - gamed by Virgin - leaning so heavily against them.

Say it was a 100m dash they were competing in - Virgin had rigged the rules so that WMSR had to go the long way round on the track.

Or if Boxing, Virgin cut both their arms off before entering the ring.

I agree that Virgin didn't kill them by stealing their fares revenue, but they definitely didn't compete genuinely.

Virgin's opposition to WSMR operations through the West Midlands was directed by DfT - I believe DfT threatened Virgin with breach proceedings if they didn't actively oppose WSMR getting paths and passenger stops at major stations. Unfortunately, the money ran out at WSMR before Virgin's moderation of competition protection expired, otherwise I suspect things could have got more interesting.

All of which is relevant to this thread in that it was DfT institutional opposition to open access that was the real obstacle to WSMR - and may yet be to HT and/or GC.

 

[py_megapixel]

Virgin won by rigging the legal structures and market so that WMSR could never be allowed to provide genuine competition to them. It was good that WMSR managed to get token Shrewsbury and Wrexham services out of Virgin in the end, but that's all they could ever do with the system - gamed by Virgin - leaning so heavily against them.

All of which is relevant to this thread in that it was DfT institutional opposition to open access that was the real obstacle to WSMR - and may yet be to HT and/or GC.

Sorry but what does WMSR stand for?

 

[si404]

Sorry but what does WMSR stand for?

Stands for a typo!

Wrexham, Shropshire and Marylebone Railway company ltd. An Open Access Operator commonly called Wrexham & Shropshire that ran for a couple of years a decade ago.

 

[py_megapixel]

Stands for a typo!

Wrexham, Shropshire and Marylebone Railway company ltd. An Open Access Operator commonly called Wrexham & Shropshire that ran for a couple of years a decade ago.

Oh right, thanks for clarifying

 

[ainsworth74]

Sorry but what does WMSR stand for?

Wrexham, Shropshire and Marylebone Railway - A short lived but very popular (in enthusiast circles) open access operator. Wiki has the pertinent details:

Wrexham & Shropshire - Wikipedia

en.wikipedia.org

 

[Domh245]

Sorry but what does WMSR stand for?

Wrexham, Shropshire & Marylebone Railway

 

[si404]

Virgin's opposition to WSMR operations through the West Midlands was directed by DfT - I believe DfT threatened Virgin with breach proceedings if they didn't actively oppose WSMR getting paths and passenger stops at major stations.

didn't Virgin push for the anti-competition clauses in the first place?

But fair enough on Virgin if they didn't want to game the system against WSMR as much as the DfT wanted them to.

 

[Starmill]

It is the legal position the gives the DfT issues

I'm afraid that the old line from Ministers 'ooh, well the legal advice is a bit sketchy' is not only easy enough to deploy in almost any technical situation as an excuse but also nearly impossible to believe from this government. The legal advice for anything under discussion here would look orders of magnitude better than, say, in the Prorogation cases from last year or the DWP's recent Court of Appeal defeat. The difference is that in those cases it suited them politically to proceed with very obviously unlawful action, and in this one it suits them to watch and wait. Not that I think by any means that's the wrong decision by Ministers, but just that I think it's unfair to give the government any credit for it.

The key issue here is how the public return to both GC and HT and whether this will match the amended business plans now with the ORR as the justification for obtaining those TAA extensions.

Indeed. As I've hinted, their only real option is to use the time now in the best way possible, start up again at just the right time, be as agile as possible to the changed operating conditions and the entirely new market, and to hope for the best of an economic recovery.

 

[Old Yard Dog]

It also seems imprudent to have these primarily abstractive services clogging up busy mainlines with short trains.

So you think all ECML mainline trains should go to Leeds and Newcastle and nowhere else then? We wouldn't need Hull Trains and Grand Central if LNER served the whole of Yorkshire and the north-east, and not just the privileged few cities. Heaven forbid the HT and GC should interfere with their 2 or more tph to London. Why should everybody have to change at Leeds, Newcastle or Doncaster with all the stress that entails?