First Group terminates two franchises?

[47421]

Ouch!!!

looks like basically the whole amount, with a small discount to recognise it is being paid now rather than drip fed over the term of the franchise

Going to be interesting to see what happens re Greater Anglia - Abellio and Mitsui are on the hook for £280million under their wildly overoptimistic bid

 

[Class 170101]

Going to be interesting to see what happens re Greater Anglia - Abellio and Mitsui are on the hook for £280million under their wildly overoptimistic bid

Sorry I don't understand that figure can you explain how you came by that?

 

[ScottGallagher]

Must be relief all round in Perth today. Stagecoach dodged a bullet not retaining West Coast or SWT , probably even EMT.

Is there any special reason why no DOR solution here?

 

[Watershed]

The DfT still pays a management fee for the consultants that run the OLRs. I wouldn't be surprised if that fee is on the same order as - if not higher than - the ~1% administered profit that the ERMAs are currently costing.

Plus the Transport Minister recently admitted to the Parliamentary Committee that the DfT would not have been able to cope with taking over all franchises, had there been no EMAs.

 

[Bletchleyite]

Is there any special reason why no DOR solution here?

Because they haven't defaulted per-se, they've moved onto a support package pending the Williams Report which most TOCs will move onto. DOR only kicks in if there isn't agreement.

 

[BigCj34]

In the case of a management contract, who sets the fares? Will that be by the DfT and will that be a good thing?

 

[Watershed]

In the case of a management contract, who sets the fares?

In terms of strategic direction (i.e. "please create flexible season tickets which are revenue neutral"), the DfT. In terms of implementation (i.e. "a 3-day season ticket will cost £x and will be defined under fare code XYZ"), mostly the contractor.

Will that be by the DfT and will that be a good thing?

From a purely fiscal standpoint, taxpayers (and thus the Treasury and DfT) would be satisfied with the outcome that ends up with reduced subsidy (i.e. higher fares). Whether or not DfT control will lead to that outcome is another issue!

The current level of DfT involvement obviates fares regulation, as the revenue risk lies entirely with the DfT. This means that fare increases will become even more of a political matter than they already were - TfL's bailout conditions are a textbook example.

 

[Bald Rick]

The South Western Railway termination payment is £33.2 million. Costs already written off were £102m.

This means that a total of £135m of the £146m Parent Company Guarantee has been forfeited by First.

Ouch!!!

Ouch indeed. But First seem ‘happy’ to sign up to it, so one assumes they think they got a good deal.

It’s sort of payback for being denied the East Coast franchise all those years ago when NX won it from (allegedly) second place, that was a great one to lose.

Does anyone seriously expect either Stagecoach or Virgin to return?

I doubt Stagecoach will. I wouldn’t rule out Virgin, as perhaps the brand is worth a small margin on rail operations. They would only do it as a minority partner, clearly.

 

[dk1]

looks like basically the whole amount, with a small discount to recognise it is being paid now rather than drip fed over the term of the franchise

Going to be interesting to see what happens re Greater Anglia - Abellio and Mitsui are on the hook for £280million under their wildly overoptimistic bid

Oh bugger. That's our pay deal gone for 20/21/22/23/... haha

 

[47421]

Sorry I don't understand that figure can you explain how you came by that?

Abellio East Anglia Limited accounts for the year ended 31 March 2019 page 44 note 25. I rounded up. The actual amount is £271,789,970. Note 18 says £80,000,000 drawn as at 15 August 2018, which rather proves DfTs point that the franchise was going down khazi well before covid. Will be interesting to see how much was drawn in year to 31 March 2020, those accounts should be published soon

 

[Class 170101]

Abellio East Anglia Limited accounts for the year ended 31 March 2019 page 44 note 25. I rounded up. The actual amount is £271,789,970. Note 18 says £80,000,000 drawn as at 15 August 2018, which rather proves DfTs point that the franchise was going down khazi well before covid. Will be interesting to see how much was drawn in year to 31 March 2020, those accounts should be published soon

Ok, far too technical for me at this time of the evening.

 

[LNW-GW Joint]

In the case of a management contract, who sets the fares? Will that be by the DfT and will that be a good thing?

Control of fares will now be with DfT, but they could devolve some of the detail to FirstGroup.
I doubt DfT wants to get involved in the mechanics of fares setting, it will be just the policy and maybe the timing.
If the intention is to move to a new national fares system, DfT will have to wait until all or most of the ex-franchises have similar agreements to implement it.
Delaying the January increase is the first sign of DfT using those powers (under the emergency contracts).

 

[HarryL]

If Virgin agree to cover pensions. That was why they lost the franchise in the first place. Although I wouldn't be keen on the 'mandatory reservation or you can't travel policy' they were considering introducing just before the franchise ended. Then the Azuma name and the Japanese writing would return to the 80x series. Maybe you'd even get a Japanese style mascot talking in the toilets. The potential there...

At the risk of bringing this thread slightly off topic, Virgin was already trying to pull out of the West Coast in all but name when they got disqualified, their unsuccessful proposal was 50% stagecoach, 30% SNCF and only 20% Virgin (which is a lower percentage than Trenitalia current own in Avanti) so it would be heavily unlikely they would return without another's backing.

 

[tpjm]

What’s happening with TPE as that has been in trouble for some time.

Worth noting that FirstGroup put money to one side in order to protect TPE in the event that the franchise made a loss last year and it wasn't actually required in the end so things aren't as bad financially as you might think.

 

[185]

Worth noting that FirstGroup put money to one side in order to protect TPE in the event that the franchise made a loss last year and it wasn't actually required in the end so things aren't as bad financially as you might think.

That was last year. With the (contractually agreed) reducing subsidy, and this years global apocalypse, it's a fair guess that they are itching to ditch it.

 

[LittleAH]

That was last year. With the (contractually agreed) reducing subsidy, and this years global apocalypse, it's a fair guess that they are itching to ditch it

Of all the TOC's that FG would have wanted to ditch, it would've been SWR. TPE will go the same way as Avanti and SWR in the new year.

 

[BeHereNow]

After already recording a £106m loss and with plenty more cash at risk it will be interesting to see what the final settlement is.

 

[Clarence Yard]

The £106m loss is actually an impairment provision, which also takes into account future losses as well, so that is money is already catered for. The DfT are looking for way more than this, around £126m more is the figure that FG formally stated last week as their maximum cash exposure.

TPE has been the subject of numerous formal DfT Franchise “Change” events so that £126m amount is the subject of some very complicated negotiations which could very well see it reduced. That is why the negotiation period has been extended.

 

[Class 170101]

The £106m loss is actually an impairment provision, which also takes into account future losses as well, so that is money is already catered for. The DfT are looking for way more than this, around £126m more is the figure that FG formally stated last week as their maximum cash exposure.

TPE has been the subject of numerous formal DfT Franchise “Change” events so that £126m amount is the subject of some very complicated negotiations which could very well see it reduced. That is why the negotiation period has been extended.

So that I understand you correctly FG think their maximum exposure on the TPE franchise is (106+126) £232million and due to DFT Franchise Change events, whatever those might be, is likely to be less than the £232m figure?

 

[Clarence Yard]

No, the cash exposure is only a maximum of £126m, the £106m having already been allowed for and so the cash for that is already provided for from within the business.

Impairment provisions (they used to be called onerous contract provisions) make funding these potentially big future calls on cash much easier because you can release the necessary funds when you reverse either part or all of the provision. Having to fund a new cash need of £126m is a lot better than trying to find £232m!

 

[BeHereNow]

I thought you said Transpennine weren't close to collapse, and that "The event of Change is well defined so the effects are relatively easy to quantify to both parties satisfaction."

 

[Clarence Yard]

It isn’t anywhere near to collapse and Franchise Changes are easy to quantify.

The problem for OG’s is that the DfT are not exactly being forthcoming in how they have calculated their estimate of future franchise losses or what Change events they have taken into account in those estimates. That is why the negotiations for a few TOCs are taking a time.

 

[hwl]

It isn’t anywhere near to collapse and Franchise Changes are easy to quantify.

The problem for OG’s is that the DfT are not exactly being forthcoming in how they have calculated their estimate of future franchise losses or what Change events they have taken into account in those estimates. That is why the negotiations for a few TOCs are taking a time.

The graduate scheme's random number generator spreadsheets (again) with little workings or no input assumptions?

Bet they don't clearly quantify what was undeliverable due to DfT in some way (e.g. impossible train service levels, delaying or not funding NR for improvements).

 

[BeHereNow]

I wonder if Edinburgh to Liverpool is an "impossible service"?

 

[Class 170101]

I wonder if Edinburgh to Liverpool is an "impossible service"?

I think it made the timetable for the original December 2019 / May 2020 timetable if you are referring to the route via Newcastle and Leeds so I don't think thats impossible. For TPE I think its trains via the Castlefield Corridor.

 

[LNW-GW Joint]

I think it made the timetable for the original December 2019 / May 2020 timetable if you are referring to the route via Newcastle and Leeds so I don't think thats impossible. For TPE I think its trains via the Castlefield Corridor.

There were/are problems with both services though.
The Edinburgh services are restricted to diesel operation on the northern ECML.
Via Castlefield I think all the TPE services made it into the timetable and it was other operators (mainly Northern) who were affected by capacity/performance restrictions.

 

[swt_passenger]

There were/are problems with both services though.
The Edinburgh services are restricted to diesel operation on the northern ECML.
Via Castlefield I think all the TPE services made it into the timetable and it was other operators (mainly Northern) who were affected by capacity/performance restrictions.

The former is an infrastructure problem that is overcome by using 802s.

 

[BeHereNow]

Could this have anything to do with it

Key North East rail route clogged - chiefs call for investment so region can get services it needs

A transport chief has warned that the North East is unlikely to have all of the train services it needs due to a lack of investment in a vital regional route.

www.google.com

"The committee chair, Cllr Martin Gannon, also the leader of Gateshead Council, referenced a proposal by LNER before Covid-19 about introducing a third train to London each hour, which could result in a Transpennine service to Manchester having to be dropped."

 

[LNW-GW Joint]

The former is an infrastructure problem that is overcome by using 802s.

But there could (I don't know) be extra operational costs for TPE because of this.
It all depends on contracts - the one with Hitachi and the original franchise agreement with DfT (2015).
You can be sure FG will look for all the loopholes.

 

[swt_passenger]

But there could (I don't know) be extra operational costs for TPE because of this.
It all depends on contracts - the one with Hitachi and the original franchise agreement with DfT (2015).
You can be sure FG will look for all the loopholes.

Their track access application was made on the basis of diesel operation for the first couple of years, so surely they can’t really complain about it?