Government to extend Emergency Measures Agreements

[Jorge Da Silva]

Franchise support to be extended by 18 months

UK: The government is preparing for a further 18 months of financial support for passenger train operators once the existing Emergency Measures Agreements expire on September 20, industry insiders have confirmed. A formal decision is expected to be announced by Secretary of State for Transport...

www.railwaygazette.com

Franchise support expected to be extended by 18 months

Franchise support to be extended by 18 months
8 July 2020

UK: The government is preparing for a further 18 months of financial support for passenger train operators once the existing Emergency Measures Agreements expire on September 20, industry insiders have confirmed.

 

[Bletchleyite]

That gives a decent transitional period to swap the franchises for something else, I guess.

 

[tbwbear]

Will the extended Franchise Support be enough / in time to save some of the TOCs ?

There are new reports in several newspapers that First group has said uncertainty may cast significant doubt on its continuing ability to operate as a going concern. It has reported losses of just under £300m for the year to the end of March.

 

[matt_world2004]

Will the extended Franchise Support be enough / in time to save some of the TOCs ?

There are new reports in several newspapers that First group has said uncertainty may cast significant doubt on its continuing ability to operate as a going concern. It has reported losses of just under £300m for the year to the end of March.

The emergency measures pay a TOCs operating costs +2% margin. This ish rather generous and if first is still struggling after march it would be because of other sectors of their business and not the train operating one

 

[Sandy2]

Quite an ominous (if not unsurprising) message to the Industry if the working assumption is now that the TOCs are not going to be able to support themselves for at least the next 18 months or so.

Not sure where this leaves open-access either.

 

[tbwbear]

The emergency measures pay a TOCs operating costs +2% margin. This ish rather generous and if first is still struggling after march it would be because of other sectors of their business and not the train operating one

I think a lot of their troubles come from the USA Bus Operations, but going forward you would have to have some doubts whether they will sign up for the EMA system from September unless the measures really do pay 2% for another 12-18 months.

You would hope that given the risks and pain everyone else is going through at the moment, these companies are not given a "+2%" risk-free ride for 18 months. I doubt the treasury wants to pay companies to run empty trains for ever. Something is going to have to give before 18 months is up.

 

[LNW-GW Joint]

The EMA might not be on the same terms after September, like the furlough scheme is gradually pulling back from 80% support.
But the DfT message is that the full franchises will not be reinstated any time soon.
It gives them an extended window to reorganise the industry (having not really achieved anything in the last 4 months).
2% is hardly a great incentive to keep going.
As I understand it the 2% is applied to TOC costs at the point the EMA started.
We've no idea what actual costs the TOCs have had during lockdown, they might well be more than "normal" with all the disruption to plans.

 

[Skymonster]

Franchise support to be extended by 18 months

UK: The government is preparing for a further 18 months of financial support for passenger train operators once the existing Emergency Measures Agreements expire on September 20, industry insiders have confirmed. A formal decision is expected to be announced by Secretary of State for Transport...

www.railwaygazette.com

Franchise support expected to be extended by 18 months

It needs to be...

FirstGroup could cease trading as coronavirus hits passenger levels

Rail and bus operator warns its future is in doubt after reporting loss of almost £300m

www.theguardian.com

FirstGroup could cease trading as coronavirus hits passenger levels
Rail and bus operator warns its future is in doubt after reporting loss of almost £300m

FirstGroup, the UK’s largest bus company and operator of rail franchises including Avanti West Coast and Great Western Railway, has admitted it may not be able to continue trading because of the impact of the coronavirus on its business.

The company said on Tuesday there was “a material uncertainty” that may cast significant doubt on its continuing ability to operate, as it reported losses of just under £300m for the year to the end of March.

 

[Bletchleyite]

Not sure I'd shed a tear from the loss of FirstGroup. As usual it'd be bad for the staff but the services would mostly be replaced so they'd get other jobs.

 

[Ianno87]

That gives a decent transitional period to swap the franchises for something else, I guess.

I hope there's at least a plan within the 18 months to return passenger numbers to an economically sustainable level.

 

[Starmill]

It's rumoured that the Department for Transport are likely to announce soon the extension of the emergency agreements signed back in March for a further year and a half.

Franchise support to be extended by 18 months

UK: The government is preparing for a further 18 months of financial support for passenger train operators once the existing Emergency Measures Agreements expire on September 20, industry insiders have confirmed. A formal decision is expected to be announced by Secretary of State for Transport...

www.railwaygazette.com

It will be interesting to see how much money will be in these new contracts compared with the first one, and what is hidden in the details.

It seems these will apply to the 14 operators contracted by DfT.

Also worth nothing that CrossCountry's current Direct Award is due to expire in October, right after these new Agreements will begin.

 

[Bald Rick]

It needs to be...

FirstGroup could cease trading as coronavirus hits passenger levels

Rail and bus operator warns its future is in doubt after reporting loss of almost £300m

www.theguardian.com

As discussed elsewhere, it’s not the rail business that is a problem for first.

 

[Bletchleyite]

I hope there's at least a plan within the 18 months to return passenger numbers to an economically sustainable level.

Agreed, though it should be noted that "an economically sustainable level" may not necessarily mean the previous level. As I've mentioned before, providing peaky commuter capacity is really, really expensive, so if commuting reduced to the level that we could run an all day Saturday timetable on commuter routes like the south WCML, with an extra 4 coaches tacked onto the few busiest services, then that would be hugely, hugely cheaper to run than what went before. I doubt it'd result in job losses, but perhaps it could reduce the amount of overtime needed to keep the service going.

 

[matt_world2004]

I can't see the railway surviving without a considerable subsidy for quite some time. Even on busy London commuter routes.

 

[GRALISTAIR]

At least they are not letting the railways go broke.

 

[paulmch]

I'm sure there'll be a lot of strings attached - standby for a big DOO push!

 

[yorksrob]

I'm sure there'll be a lot of strings attached - standby for a big DOO push!

So another year of strikes on top of the year of COVID, on top of the previous year of strikes. Whoop-de-doo.

 

[Malcolmffc]

Yeah, they’re very interesting. They can last from minutes to hours, and as I say, I’ve heard them during CPR as well.

I'm sure there'll be a lot of strings attached - standby for a big DOO push!

pretty good time to have to deal with a bunch of strike action

 

[richw]

Will the extended Franchise Support be enough / in time to save some of the TOCs ?

There are new reports in several newspapers that First group has said uncertainty may cast significant doubt on its continuing ability to operate as a going concern. It has reported losses of just under £300m for the year to the end of March.

It’s misrepresented. First actually said in the stock market statement they want rid of American businesses. Retaining U.K. bus and rail which both turned a profit!
The entire loss is write down in preparation to dispose of America

 

[tbwbear]

I hope there's at least a plan within the 18 months to return passenger numbers to an economically sustainable level.

What would we say is an economically sustainable level ?

If passenger numbers now recovered enough to be around half what they were in 2019, and then stayed like that for 2 or 3 years, that would be economically sustainable wouldn't it ?

If, just for the sake of it, you said passenger numbers and corresponding revenue fell to around 1995/2000 levels -

You could argue the size of the network hasn't changed since then much since then so you wouldn't need line closures.

You could sustain it with longer trains and frequency reductions (weekend timetable everyday as proposed above) and less overtime etc... couldn't you ?

Lower revenue, lower costs, same or increased subsidy.

I am "bearish" by name and by nature, but am I the only one who thinks the falls could be worse than half the current levels ?

 

[tbwbear]

It’s misrepresented. First actually said in the stock market statement they want rid of American businesses. Retaining U.K. bus and rail which both turned a profit!
The entire loss is write down in preparation to dispose of America

Didn't they also indicate that the UK rail profits were like looking in a "rear view mirror" and going forward not so secure at all ?

The profits of UK rail going forward depend on government schemes (EMA) in the short term don't they ?

Two of their franchises were not in the best of health even before COVID. I thought SWR was heading for the buffers before lockdown ?

 

[squizzler]

Not sure I'd shed a tear from the loss of FirstGroup. As usual it'd be bad for the staff but the services would mostly be replaced so they'd get other jobs.

I disagree, First may not have excelled in all areas it is true, it would be bad for the transport industry to lose such a major passenger mobility company. They took a punt on open access. We need such companies that are big and ugly enough to lobby government for rail investment.

 

[Starmill]

What would we say is an economically sustainable level ?

If passenger numbers now recovered enough to be around half what they were in 2019, and then stayed like that for 2 or 3 years, that would be economically sustainable wouldn't it ?

If, just for the sake of it, you said passenger numbers and corresponding revenue fell to around 1995/2000 levels -

You could argue the size of the network hasn't changed since then much since then so you wouldn't need line closures.

You could sustain it with longer trains and frequency reductions (weekend timetable everyday as proposed above) and less overtime etc... couldn't you ?

Lower revenue, lower costs, same or increased subsidy.

I am "bearish" by name and by nature, but am I the only one who thinks the falls could be worse than half the current levels ?

What's 'sustainable' is quite unknown, because it depends on what subsidy is on offer and what costs savings can be achieved without cutting output (output could be crudely measured as passenger km, or train seat km).

How much prices can rise is also in some question. I must say that 50% seems rather optimistic to me. Systra suggested in a very quick piece of research in May that demand might return to 70% of 2019 levels in five years.

 

[Nicholas Lewis]

What would we say is an economically sustainable level ?

If passenger numbers now recovered enough to be around half what they were in 2019, and then stayed like that for 2 or 3 years, that would be economically sustainable wouldn't it ?

If, just for the sake of it, you said passenger numbers and corresponding revenue fell to around 1995/2000 levels -

You could argue the size of the network hasn't changed since then much since then so you wouldn't need line closures.

You could sustain it with longer trains and frequency reductions (weekend timetable everyday as proposed above) and less overtime etc... couldn't you ?

Lower revenue, lower costs, same or increased subsidy.

I am "bearish" by name and by nature, but am I the only one who thinks the falls could be worse than half the current levels ?

DfT has provided its weekly update on transport usage and national rail is at 13% of normal level this week which is a few % down on previous weeks. My weekly trip into London substantiates that demand around here (Brighton Line Thameslink) even coming back in the middle of the rush hour this evening occupancy remains extremely weak. My niece has been told she wont be needed back in London office til 2021 so 50% appears far too optimistic currently.

You can see the extent of costs being incurred if you view DfT spend over 25k here for April. There are numerous entries coded "EMA on account" payments which i take to be Emergency Measures Agreements as they don't show up in previous months. The costs are showing by railway periods 1 & 2 for some TOC's but not all of them but some extracts:

Avanti WC £141m
GWR £115m
GTR £114m
Northern £78m

Whilst running a fall service may seem a folly i guess the only costs being avoided currently would be energy/fuel costs as lease costs are fixed and avoiding NR variable costs will only created a deficit in NR's books that would need to be covered. So short a fundamental rehash of whats the railway is here for and right sizing resources to match its difficult to reduce current costs much so most important task needs to be restoring confidence to get numbers up again by removing the essential travel only mantra and adopting 1m plus rule and lowering fares in the off peak.

 

[jonnyfan]

Leisure travel is where the growth in numbers is going to have to come from. The trains the last few weeks are now busier at the weekend than weekday rush hour, from what I've seen working trains around Piccadilly in Manchester.
The commuter market is not going to be the same for a very long time, and leisure is going to be the key source of income for the foreseeable

 

[Bletchleyite]

So another year of strikes on top of the year of COVID, on top of the previous year of strikes. Whoop-de-doo.

Strikes would make little difference at the moment. Or they could just ban them - COVID is a fantastic excuse for a Tory Government to do that.

 

[baz962]

Strikes would make little difference at the moment. Or they could just ban them - COVID is a fantastic excuse for a Tory Government to do that.

While I am happy with my lot and would almost certainly never vote to strike , I don't think the government would find it easy at all. The only profession's that can't strike are the police and prison officer's , presumably for safety reasons. The government had to go to the high court to stop the prison officer's from striking , would the high court side with the government over rail worker's.

 

[Bletchleyite]

While I am happy with my lot and would almost certainly never vote to strike , I don't think the government would find it easy at all. The only profession's that can't strike are the police and prison officer's , presumably for safety reasons. The government had to go to the high court to stop the prison officer's from striking , would the high court side with the government over rail worker's.

It depends on the law on the matter. A law could be passed that strikes are illegal for workers in <list of industries>.

 

[Ianno87]

Leisure travel is where the growth in numbers is going to have to come from. The trains the last few weeks are now busier at the weekend than weekday rush hour, from what I've seen working trains around Piccadilly in Manchester.
The commuter market is not going to be the same for a very long time, and leisure is going to be the key source of income for the foreseeable

Agreed. Just needs some leisure fares offers, Railcard offers, that sort of thing to get it all going again when the time is right.

 

[Bletchleyite]

Agreed. Just needs some leisure fares offers, Railcard offers, that sort of thing to get it all going again when the time is right.

Perfect time for a National Railcard. How about £30 as a special for the first year, then step it up to something more realistic (as I've said before I'd pay £10/month by direct debit or thereabouts).

Having taken a masked journey yesterday I doubt I'll do many until that gets dropped as it's not at all comfortable[1], but once it is I'll be back.

[1] I could technically claim an exemption, being asthmatic, but I don't think it would be right to do so as the reason would just be discomfort, not breathing issues.