FirstGroup eyes long-term First Great Western deal

[BestWestern]

FGW staff have received in the post today a letter from MD Mark Hopwood, stating First's intentions to bid for the new GW franchise, and of course their confidence in winning it. The issue of the First-owned HST's is something of a red herring. No operator with any serious future ambitions towards UK rail franchises, is going to commit commercial suicide by being deliberately obstructive to the smooth running of any franchise successor, by withdrawing the rolling stock required to operate the services; whether they own it or not. I would imagine that DfT would 'request' First to make the HST sets available, and should First refuse then watch their share price tumble when it becomes clear that their railway career in the UK is over! Unless, of course, there are other DfT plans afoot...!!

 

[tbtc]

I know I've said it before, but I do wonder why more companies don't purchase their own fleet of generic units (e.g. Turbostars) which could be a big bargaining chip at franchise (re)negotiation time. It wouldn't even need to be a massive fleet, just enough to ensure that your bid allowed you to run more services than the competition...
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FGW staff have received in the post today a letter from MD Mark Hopwood, stating First's intentions to bid for the new GW franchise, and of course their confidence in winning it. The issue of the First-owned HST's is something of a red herring. No operator with any serious future ambitions towards UK rail franchises, is going to commit commercial suicide by being deliberately obstructive to the smooth running of any franchise successor, by withdrawing the rolling stock required to operate the services; whether they own it or not. I would imagine that DfT would 'request' First to make the HST sets available, and should First refuse then watch their share price tumble when it becomes clear that their railway career in the UK is over! Unless, of course, there are other DfT plans afoot...!!

They acn "request" all they want, but these are trains owned outright by First. Unless there's a "compulsory purchase order" I don't know how you can force First to hand them over, especially when they could claim they'd rather use them on Hull Trains/ Scotrail...

 

[BestWestern]

I know I've said it before, but I do wonder why more companies don't purchase their own fleet of generic units (e.g. Turbostars) which could be a big bargaining chip at franchise (re)negotiation time. It wouldn't even need to be a massive fleet, just enough to ensure that your bid allowed you to run more services than the competition...
--- old post above --- --- new post below ---


They acn "request" all they want, but these are trains owned outright by First. Unless there's a "compulsory purchase order" I don't know how you can force First to hand them over, especially when they could claim they'd rather use them on Hull Trains/ Scotrail...

I agree that they couldn't 'force' the issue, but they wouldn't need to! There would be no advantage for First in denying any new franchisee their use, as it would doubtless seriously jepardise any future rail franchise prospects. As has been said already, DfT have the powers to make it very difficult for the stock to be deployed elsewhere, since they mirco-manage the franchise situation, so I really don't see any valid reason at all for First to go out of their way to make a problem out of it!

I agree with your thoughts about new stock. I'd have thought someone like First, who have multiple rail franchises, could purchase a modest fleet of 'off the peg' stock, Turbostars being a good example, and use them wherever there is a need. The cost would be underwritten simply by leasing them to other operators in the future if required. Presumably the incentive just isn't there, but with the guaruntee of someone somewhere leasing them if the purchaser didn't need them for it's own operations, you'd think it would be a definite possibility?!

 

[Helvellyn]

The issue of the First-owned HST's is something of a red herring. No operator with any serious future ambitions towards UK rail franchises, is going to commit commercial suicide by being deliberately obstructive to the smooth running of any franchise successor, by withdrawing the rolling stock required to operate the services; whether they own it or not. I would imagine that DfT would 'request' First to make the HST sets available, and should First refuse then watch their share price tumble when it becomes clear that their railway career in the UK is over!

Exactly, yet so many on here seem to believe that owning 6 HST sets means First must win the Great Western franchise. If they don't they'll throw a temper tantrum and take their trains away.

In case people forget, open access operator Hull Trains swapped its nice new Class 222/1 Pioneers (Meridians) for slightly older, and less reliable (based on FGW operation) Class 180 Adelantes. That was so EMT could get the extra 4 222s for their Corby services. I seem to recall that the Open Access operator was persuaded to swap the units by the DfT.

So even if First lost the franchise and took the HSTs away, would they really end up with Hull Trains? Does that operation need to switch from 5-car DMUs to 2+8 HST sets? What does First do with the Class 180s, on which it will have a leasing deal, presumably with a penalty clause if they're handed back early? As for ScotRail, apart from the Caledonian Sleepers it's an EMU and DMU operation. Why would Transport Scotland want 6 HST sets added to the ScotRail fleet? Where would ScotRail use them? Again, it'd be overkill bringing in a 2+8 HST set to replace at best 6-car DMUs.

So yes, First could pull the 6 sets, but it's not like you can just drop them somewhere else! Don't forget, when First got FGW they had to cut unit numbers (DfT specification) and were getting absolutely hammered in the press for overcrowding. Buying those 6 HST sets allowed FGW to replace multiple units on some services, to increase capacity that had been cut. The cost of buying the extra sets themselves was more than worth it for limiting the damage to their reputation.

 

[The Planner]

Would there be anything to stop First taking their toys home and then setting up a mini ROSCO and leasing the HSTs out ?

 

[87015]

Would there be anything to stop First taking their toys home and then setting up a mini ROSCO and leasing the HSTs out ?

Isn't a mini-ROSCO exactly how it operates at the moment, leasing to FGW from Group level? Depending on how they sorted the current arrangement with the DFT then they probably won't be able to take their toys home anyway...

 

[DarloRich]

FGW staff have received in the post today a letter from MD Mark Hopwood, stating First's intentions to bid for the new GW franchise, and of course their confidence in winning it. The issue of the First-owned HST's is something of a red herring. No operator with any serious future ambitions towards UK rail franchises, is going to commit commercial suicide by being deliberately obstructive to the smooth running of any franchise successor, by withdrawing the rolling stock required to operate the services; whether they own it or not. I would imagine that DfT would 'request' First to make the HST sets available, and should First refuse then watch their share price tumble when it becomes clear that their railway career in the UK is over! Unless, of course, there are other DfT plans afoot...!!

But they are a First group asset, bought on the open market. Should the dft try any pressure First could quite easily litigate, and have a good chance of winning, under some form of restraint of trade.

They bought the vehicles; they are theirs to do with as they please. They would say they are simply looking to realise the value of their assets bought for a franchise they no longer hold OR want to move them to a franchise they do still hold where they are of use to the owning company.

I don’t think the dft could force them to hand company assets over to a competitor! I don’t for one minute think First would try it on like that i think they would more likely use the stock as a way to get a better deal.

Now if fgw loose the franchise they have a way of mitigating some of the loss as the new franchise holder will need those units, and may well have to pay a heavy premium to buy them from First.

Welcome to the world of the privatised railway.

 

[imagination]

Now if fgw loose the franchise they have a way of mitigating some of the loss as the new franchise holder will need those units, and may well have to pay a heavy premium to buy them from First.

However, doing that could be just the solution the railway network needs to the problems discussed in http://railforums.co.uk/showthread.php?t=45341 - if such actions became commonplace at any rate.

 

[DarloRich]

But what can be done - the companies are private bodies run on financial lines. My post basically says First group could. if they wanted, screw the next franchise holder either by withholding the stock or by charging a massive premium to transfer ownership. Either way we as customers loose; either by getting a poor service or by paying larger fares for a poorer service

I can’t see how the government can force a private company to hand over their assets, acquired under a free open market, to a third party company UNLESS there is VAST government legislation, which I doubt there is an appetite for

 

[starrymarkb]

Forgetting the HSTs for a minute.

First need to maximise their income in the optional 3 years to fulfill the contract payments, but the GWML is going to be a mass of engineering work and disruption for Crossrail and Electrification which will have an effect on trade. Plus if they did suffer the disruption they may not see the benefit as the franchise would be up for renewal shortly before completion of the work!

 

[Mystic Force]

First *could* take their toys away, but if they did lose the franchise, surely it would then be in the best interest of the share holders that the companies assets should be making money, not paying parking fees. And as they are expected to be replaced in the not too distant future I don't think its that bigger a deal anyway. Except if I still lived in London and wanted to go back home to Devon on a friday night and then I would have a different view.

 

[Zoe]

First own the HSTs so if they wanted to use them on Hull Trains or even a new Open Access operation then I don't see what the dft could do about it. If Hull Trains was a franchise then the dft of course could specify exactly the stock to be used though. First do not have to lease or sell the HSTs to anyone. I doubt the dft are going to want to risk the possibility of another company not having the stock to run the service specified so will just give the franchise to First. Even if First were going to lease them out to another comapny they could get away with charging what they liked for the HSTs as they would be essential to run the service. For this reason I'm not sure many companies will be interested in bidding. First are clearly the only option here for the new franchise.

 

[OxtedL]

First are clearly the only option here for the new franchise.

Because of 5 HSTs?!

 

[Zoe]

Because of 5 HSTs?!

Well I should say only logical option. Giving the franchise to anyone else is likely to be a bad deal for all.

 

[Darandio]

First own the HSTs so if they wanted to use them on Hull Trains or even a new Open Access operation then I don't see what the dft could do about it.

DFT could do what they want. Whether FHT are open access or not, they still have to abide by rules set by the DFT.

Anyone thinking First could just take the HST's and dump them wherever they please are being slightly deluded I think.

 

[Zoe]

DFT could do what they want. Whether FHT are open access or not, they still have to abide by rules set by the DFT.

What rules? The dft can't force First to use their stock where they don't want it used. If you have stock for Open Access and your services then what are the dft going to do about it? The ORR makes decisions on Open Access, not the dft.

 

[WatcherZero]

First own the HSTs so if they wanted to use them on Hull Trains or even a new Open Access operation then I don't see what the dft could do about it.

Quite a bit, the Dft chooses which trains it subsidises in operation and thats where its power to decide stock moves comes from, stock cant be transferred to a different franchise without their say so and in the same way they could simply refuse to subsidise First use of them anywhere it didnt like. At the moment its not really an issue because they bought trains they were using anyway, if First tryed to lease them to another franchise or use them in one of its own the government could simply refuse to pay a penny towards their running costs.

Essentially they cant stop them using it, but they can by removing the subsidy for their operation that would be recieved when using other stock make it uneconomical to do so.

 

[Zoe]

Quite a bit, the Dft chooses which trains it subsidises in operation and thats where its power to decide stock moves comes from, stock cant be transferred to a different franchise without their say so and in the same way they could simply refuse to subsidise First use of them anywhere it didnt like. At the moment its not really an issue because they bought trains they were using anyway, if First tryed to lease them to another franchise or use them in one of its own the government could simply refuse to pay a penny towards their running costs.

Franchises are subsidized yes but Open Access services are not subsidized. I can't see any reference to Hull Trains getting a subsidy for their trains or to any of the TOCs getting a per train subsidy separate from their franchise agreement.

 

[WatcherZero]

Indeed but the Dft wouldnt have issues with that really. The OAO's survive (or mostly dont) by using the cheapest rolling stock possible and paying peanuts to lease it. Would again come back to First recieving a financial disincentive.

 

[Zoe]

Indeed but the Dft wouldnt have issues with that really. The OAO's survive (or mostly dont) by using the cheapest rolling stock possible and paying peanuts to lease it. Would again come back to First recieving a financial disincentive.

But I'm not sure the dft would want to risk First using the HSTs elsewhere or leasing them out at extremely expensive rates. If it was really as simple as the dft just having the ability to force First to give their HSTs to the new franchisee then I'm sure those at the dft wouldn't have been as annoyed as they were when it was discovered that First had purchased the HSTs.

 

[OxtedL]

I feel confident that, if they wanted to, DfT would make up some rules or just find some way of enforcing the stock lease/ change of ownership.

DfT are good at being a little bit arsey when it suits.

 

[Pumbaa]

How? Neither of them are dft let franchises. In the case of Hull Trains it isn't a franchise at all. Transport Scotland could in theory specify in the new franchise that only ROSCO stock may be used but this is very unlikely. If a company owns stock and wants to use it on an Open Access service then how are the dft going to prevent them?

Very easily! All franchises have to submit rolling stock access applications! These are passed through both DfT and ORR, and only happen if both are happy. DfT say no, they can't be used on fHT or fSR, they lean heavily on ORR and they say no, job done.

First aren't the 'only sensible' choice for the franchise at all, they are just one choice. The ownership of the stock is a non-issue and shouldn't factor in the awarding of the franchise at all.

 

[Zoe]

Very easily! All franchises have to submit rolling stock access applications! These are passed through both DfT and ORR, and only happen if both are happy. DfT say no, they can't be used on fHT or fSR, they lean heavily on ORR and they say no, job done.

How are the dft going to prevent them using them on Hull Trains though or leasing them out at expensive rates to the new franchisee. How would they stop First taking the nuclear option and threatening to scrap the HSTs? I'm not saying they are going to do this at all, I just don't see how the dft can prevent it. By giving the franchise to First it would be the best deal as it completely avoids the above possibilites. Also I seem to remember it was First and not the dft that decided they wanted to use their own HSTs and not the 180s.

 

[tbtc]

Indeed but the Dft wouldnt have issues with that really. The OAO's survive (or mostly dont) by using the cheapest rolling stock possible and paying peanuts to lease it. Would again come back to First recieving a financial disincentive.

Well, you could argue that using stock that First already owned would make it very cheap

 

[cj_1985]

i dont know the actual legalities ...
but, as i think i have said before... i think that if First refuse the use of their HSTs by a subsequent GWML/ICGW operator... and the DfT took the hump and started putting pressure on the ORR etc and tried to block the HSTs transfer to another First Group operation.. either franchised or Open access, or try to force First to lease them to someone else...

the DfT had better make sure that what they do is 110% legal and in no way will come back to bite them in the a*se in the form of legal action

 

[OxtedL]

The DfT will be fully able to stop them from being used on Hull Trains. And even if they weren't, they'd find a way.

I can't see First scrapping these HSTs just to spite DfT either, it would be masochism, and if they so much as threatened it in the bidding process then First would likely lose all opportunities in the rail industry in the future by default. The DfT aren't half moody and Transport Ministers don't appreciate being indiscreetly moved around, given as most of them are climbing the political ladder.

 

[Zoe]

The DfT will be fully able to stop them from being used on Hull Trains. And even if they weren't, they'd find a way.

How are they going to stop them getting used on Hull Trains. The agreement is with the ORR.

 

[OxtedL]

Lean. Make something up about timekeeping. Etc.

 

[Pumbaa]

How are they going to stop them getting used on Hull Trains. The agreement is with the ORR.

Both ORR and DfT agree on the rolling stock access agreement. All DfT have to say is that the HSTs stay on the GWML, and bolster up the level spec accordingly. Job done. It's a remarkably simple fact everyone seems to be ignoring, other than OxtedL!

 

[Zoe]

Both ORR and DfT agree on the rolling stock access agreement. All DfT have to say is that the HSTs stay on the GWML, and bolster up the level spec accordingly. Job done. It's a remarkably simple fact everyone seems to be ignoring, other than OxtedL!

For franchised services yes, I can't find anything that says the dft have to agree to the use of stock for services that are not franchised. The Railways Act 1993 gave the Secretary of State the power to decide which services should be provided under a franchise agreement. The original powers were with the Office for Rail Passenger franchising, then the SRA and now with the dft. Nowhere do I see legislation that the dft can prevent a company form accessing rolling stock. First could take the dft to court if the dft tried to block them from using their own trains where they wanted to. First do not have to make the HSTs available to any other company any more than the dft can go to the GCR and force them to lease some of their stock for mainline use.