Porterbrook moans about new franchises ordering new trains

[Confused52]

Sorry but that's just nonsense when you examine the balance sheets.

Angel Trains, Eversholt and Porterbrook make fantastic money from what they do and they know it. Porterbrook, despite have only 60 or so employees, made £500 million in revenue with a £100 million profit. 20% profit margin for doing absolutely nothing! Whereas TOCs scrap along on a 2-4% profit margin.

You could get a monkey to run the ROSCOs and you would still be laughing to the bank as they have done for the past 25 years since privatisation. I don't think they could have imagined in their wildest dreams when the railways were privatisation that passenger growth and demand for train carriages would be so strong. If more of the public actually knew about the ROSCOs more (most just think the government or TOCs own the trains) then there would be outrage. If any industry can absorb increased competition and reduced profit margins it's the ROSCOs.

Why do you think the DfT and other new leasing companies like MacQuarie/Lloyds and QW Rail are keen to get in the on the act? DfT want to cut out the third man (ROSCO) and create more vertical integration. New leasing companies would be happy to take a 10% profit margin instead of the 20% most ROSCO make. They've had a good 25 years but the days of ROSCOs making overly handsome profits is long overdue.

The ROSCOs make a handsome enough profit margin to absorb any writedowns of rolling stock so stop worrying about them.

Really, why do you think that the businesses can be compared like that when a TOC has say 100million of capital at risk whilst Porterbrook, for example, has 1000 times that capital at risk. If you consider Return on Capital Employed the answer is the opposite way round. The entities were designed for different jobs with different lifetimes. The change to longer franchises changes the roles which is precisely why Merseytravel now being their own Rosco makes sense. The new longer franchises that are shorter than Merseyrail leave a significant risk that Roscos will end up with stranded assets that must be written down even though they still have to repay the loans used to borrow the money to pay for them. That debt will be taken from the shareholder returns which are used to pay pensions to those in all industries. If that happens those who complain about easy money being made by Roscos will be screaming for compensation for their pension losses from the people who caused the problem, little realising it was themselves!

 

[tbtc]

I choose to take the opinions of industry experts. Just like your beloved bi-modes are proving to have fundamental flaws that will be exposed for years to come the new train bonanza stands to keep going for years to come. The DFT have stigmatised refurbished trains as “cast offs” so only new trains are accepted as when one bidder is proposing shiny new trains with all the positive PR that brings and another is proposing refurbished “cast offs”, wonder which bid is going to win? There are going to be some relatively ‘young’ fleets on their way to the cutters torch in the coming years which is just balmy and totally unsustainable. Many job losses on their way as well.

Funny how the "fundamental flaws" of bi-modes have moved on from "the 26m coaches will require millions of pounds in clearance work, you won't be able to push a trolley up the steep sloped carriages, passengers at the window-less seat will miss their destination station and the underfloor engines will be deafening" to, erm, the pollen filters need improvement". Progress, I suppose.

We'd complain if franchise bids were only based on finances - it's only right that the best quality bid will score highly - given how complicated/ expensive/ time-consuming it is to upgrade mid-life trains - the alternative is that the Government ignore the "quality" of the bid and just focus on price?

It's not as if there's some Logan's Run situation here - SWR won by promising 1960s 442s (although bits of them are even older than that)... Wales & Borders was won by promising 1970s 230s and 1980s 769s... WMT are also going with the 1970s 230s... Caledonian Sleeper refurbished some 1960s 73s whilst ScotRail are taking some 1970s HSTs... Northern will be running 150s until the duct tape can no longer hold them together... there's going to be a lot of stock running round that's older than you (assuming 1987 is your year of birth?).

But if you are trying to find a home for something like the 700s when another ROSCO can provide better trains (with wifi, USB, toilets etc) cheaper then maybe that indicates a problem with the leasing company, if they are charging too much for inflexible trains (i.e. ones that can't easily be cascaded elsewhere) then that's business.

What next? We should compensate private landlords if we build Council Houses, since the private landlords who've made a fortune off property over the years can no longer guarantee the income stream they've lazily been relying upon? OR we should put up with old trains (that lack modern facilities that passengers demand - plugs/ wifi/ air conditioning)?

If you can upgrade mid-life units to be "good as new" (at minimal cost, minimal disruption, minimal risk) then great, but the reality is that it seems cheaper/ simpler/ faster to build brand new trains than to fiddle about trying to bring old ones up to scratch.

 

[etc9]

The DFT have stigmatised refurbished trains as “cast offs”...

Nope, they haven't.

...so only new trains are accepted as when one bidder is proposing shiny new trains with all the positive PR that brings and another is proposing refurbished “cast offs”, wonder which bid is going to win?

Probably the bid with the highest premium, as the rolling stock element of the bids will have been scored very similarly for new trains and old trains refurbed to a high standard.

 

[DavidGrain]

There is something wrong in the thinking about rail franchises. You bid for a franchise to operate for 7 years, an asset with a life of 25-30 years. You have no choice but to take over the assets that your predecessor was operating with the leasing terms that are in force knowing that you cannot replace those assets for a least 3 years and that in another 4 years you may lose the franchise and your successor with have the benefit or otherwise of your decisions. The result of this is that you either get screwed by the leasing companies or you sweat the assets and screw the leasing company.

I used to work for a road transport company with 400 vehicles. We leased the vehicles on a 4 year term and handed them back often with over 200,000 miles on the clock. By this time they were probably scrap. The leasing company knew this, we knew this and the price was agreed accordingly at a price which was fair to both of us. You cannot do this with a train.

 

[43096]

Can't blame them at all, the Rosco need to reduce the cost of leasing these units to a level that the market will bear. It is funny how these titans of capitalism were happy to take in the excess profits during the good times are now reduced to special pleading when the market doesn't work precisely in their favour any more.

It is funny how the same people do not get it time after time after time....

The DfT have been duplicitous in their dealings with the ROSCOs. Just one example: the 455 re-tractioning for SWT was all about creating capacity at Wimbledon to allow more/longer trains to operate without the cost of a new depot - which is a big saving to DfT. For the same DfT to then mandate a mass extinction event of those same 455s through the franchising tender process with the conversions not even complete is ethically highly questionable. Legally, they can do it, but I wouldn’t expect the ROSCOs to be investing like that again.

 

[hwl]

Seems many industry commentators disagree with you. If the average life of trains is going to be reduced to 15-20 years leasing companies will need to increase the costs of leasing those trains to compensate for the shorter amount of time they will be a revenue making asset. Bad precedents are being set with this new train bonanza.

The question is how long it can last, I suspect not long beyond SE, EM and XC tenders in the next year. At which point there will be a mountain of surplus stock which should incentive ROSCOs.

 

[43096]

The question is how long it can last, I suspect not long beyond SE, EM and XC tenders in the next year. At which point there will be a mountain of surplus stock which should incentive ROSCOs.

Incentivise them to do what? It’s all very well having a supply of trains, where will the demand for them come from in a market where passenger growth is stagnating.

 

[squizzler]

IF the trains going for scrap only have scrap value why cannot they be leased very cheaply so we can have more services and more practically longer trains?

I'm with you on this. The railway is growing (London excepted), so whilst trains might be sitting round for a year or so after they come off lease, they are unlikely to be idle for long.

You may not have noticed that all of the modern off lease stock are EMUs, which (generally speaking) don't talk to each other, and tend to be run at the maximum lengths already when needed.

Unsurprisingly, I am also bullish about further electrification, partially because of the the political implication of decent EMU's being allowed to be idle / scrapped.

 

[Rail Blues]

It is funny how the same people do not get it time after time after time....

The DfT have been duplicitous in their dealings with the ROSCOs. Just one example: the 455 re-tractioning for SWT was all about creating capacity at Wimbledon to allow more/longer trains to operate without the cost of a new depot - which is a big saving to DfT. For the same DfT to then mandate a mass extinction event of those same 455s through the franchising tender process with the conversions not even complete is ethically highly questionable. Legally, they can do it, but I wouldn’t expect the ROSCOs to be investing like that again.

I get it, I just think your argument is of marginal relevance to the issue at hand

You are using one specific example which isn't emblematic of a wider trend when you and I know fine well it isn't the original big three ROSCO s have shot themselves in the foot and are now crying foul.

The key reason that there's Desiro and 323 units going homeless is the Roscos being greedy and not realising they're not the only game in town anymore.

 

[bussnapperwm]

Well, surely the ROSCOs could form OAOs and use the stock that would be laying surplus on the routes that they create.

 

[hwl]

Incentivise them to do what? It’s all very well having a supply of trains, where will the demand for them come from in a market where passenger growth is stagnating.

Incentivise them to reduce the price they are asking

 

[bramling]

I get it, I just think your argument is of marginal relevance to the issue at hand

You are using one specific example which isn't emblematic of a wider trend when you and I know fine well it isn't the original big three ROSCO s have shot themselves in the foot and are now crying foul.

The key reason that there's Desiro and 323 units going homeless is the Roscos being greedy and not realising they're not the only game in town anymore.

It’s a pity ROSCO profits couldn’t be directed towards a few electrification schemes. 323s would be ideal for something like the Snow Hill lines or Cardiff valleys.

 

[edwin_m]

There is something wrong in the thinking about rail franchises. You bid for a franchise to operate for 7 years, an asset with a life of 25-30 years. You have no choice but to take over the assets that your predecessor was operating with the leasing terms that are in force knowing that you cannot replace those assets for a least 3 years and that in another 4 years you may lose the franchise and your successor with have the benefit or otherwise of your decisions. The result of this is that you either get screwed by the leasing companies or you sweat the assets and screw the leasing company.

I used to work for a road transport company with 400 vehicles. We leased the vehicles on a 4 year term and handed them back often with over 200,000 miles on the clock. By this time they were probably scrap. The leasing company knew this, we knew this and the price was agreed accordingly at a price which was fair to both of us. You cannot do this with a train.

This is the fundamental problem - trains last longer than franchiess. However, most trains are leased only up to the end of the franchise and the ROSCO bears the risk of finding a further use for them. Until recently this has always been possible but things have changed, probably due to the DfT incentivising franchises to bring in new stock but also because a key part of the ROSCOs costs is borrowing the money to buy the trains, and this will have fallen in line with interest rates generally.

Some trains are indeed leased for longer than a franchise term, because the DfT requires the new franchisee to take them over. This protects the ROSCO but means that future franchises can't take advantage of new stock which may be better and/or cheaper. I would expect a consequence of the current situation to be that ROSCOs start insisting on having their leases continuing into future franchises, otherwise either lease charges for new trains will go up to cover the risk. If leasing charges for old trains come down, because the ROSCOs realise any income is better than none and lower their charges to what the markey will bear, then maybe we will be back to some sort of balance.

This may be part of the reason why the Scottish government, not ScotRail, has leased the 385s. They are committed to pay for them for 25 years, and will no doubt mandate ScotRail successor franchise to use them. After that they revert to government ownership and can continue in use if there is a need for them, costing relatively little because their capital value is effectively written down.

 

[43096]

I get it, I just think your argument is of marginal relevance to the issue at hand

You are using one specific example which isn't emblematic of a wider trend when you and I know fine well it isn't the original big three ROSCO s have shot themselves in the foot and are now crying foul.

The key reason that there's Desiro and 323 units going homeless is the Roscos being greedy and not realising they're not the only game in town anymore.

It’s a complex issue and just repeating the tired cliches about greed demonstrate a lack of understanding.

The reasons behind it are many, but include:
- the PRM deadline and the cost and complexity of converting 30 year old trains (eg Renatus programme);
- desire for fleet standardisation eg SWR Aventras replacing 455/456/458/707 and the small fleets added in previous years eg 360/379;
- historically low financing costs for new trains and new market entrants not understanding the risks of what they are getting into eg 350/2 replacement (bought when finance was more costly hence higher leases);
- DfT’s simplistic assessment of “quality” in franchise bids, where new trains score highly regardless of how good they may be for the passenger;
- lack of any form of national rolling stock plan.

Whilst I get binning off the BR-era Mark 3-derived units, withdrawal of later stock with little sign of re-deployment makes no sense. For example, the West Mids franchise should really be taking all the 350s with extra capacity seeing the similar 360s moved across. Likewise, I will start to believe there is some rational thought involved if the 379s (or indeed 350/2s) move to the St. Pancras - Corby services and 707s to SouthEastern.

It also seems to me that in an age of environmental concerns, scrapping stock way short of its natural lifespan is not exactly “eco friendly” in terms of the manufacturing process.

 

[physics34]

Just because a unit is 30 years it doesnt mean its life expired. There is gonna be alot of wastage in the next few years for no good reason

 

[AndrewE]

It’s a pity ROSCO profits couldn’t be directed towards a few electrification schemes. 323s would be ideal for something like the Snow Hill lines or Cardiff valleys.

Yes, wouldn't that be a good idea... I wonder why it isn't being done?

This is the fundamental problem - trains last longer than franchises...

This may be part of the reason why the Scottish government, not ScotRail, has leased the 385s. They are committed to pay for them for 25 years, and will no doubt mandate ScotRail successor franchise to use them. After that they revert to government ownership and can continue in use if there is a need for them, costing relatively little because their capital value is effectively written down.

Thank goodness for some sanity!

It’s a complex issue and just repeating the tired cliches about greed demonstrate a lack of understanding...
It also seems to me that in an age of environmental concerns, scrapping stock way short of its natural lifespan is not exactly “eco friendly” in terms of the manufacturing process.

I agree with 43096's last bit (who wouldn't, apart from someone with shares in rolling stock manufacturers and no conscience?) but all the other stuff about repeating cliches, not understanding economics etc., is patronising crap,* based on an assumption that what we have is the only economic structure possible. In fact there are far more effective options available (and as usual Scotland is showing us the way - within the limits allowed by Westminster) but the people who are currently laughing all the way to the bank (and their place-men in politics) ensure that in England we are hog-tied by the current dogma.

*p.s. Sorry to be rude, but a few facts and some economics mixed with other stuff isn't enough to excuse the ludicrous current structure of our railway and the terrible fallout on the occupants of the UK, and the on-going grief all round the country as some people try to work out how to run the railway - while many more are busy applying rules, some are inventing even more rules and then a small number are taking advantage of the situation to get very good return out of the status quo. I'm waiting to see whether any politician will ever be brave enough to point out the the Emperor has no clothes on. It's funny (not) how London's rail-based public transport is far too important to be at the mercy of such a shambolic system...

 

[etc9]

- DfT’s simplistic assessment of “quality” in franchise bids, where new trains score highly regardless of how good they may be for the passenger;

Why are you so sure that this is the case?

 

[The Ham]

Seems many industry commentators disagree with you. If the average life of trains is going to be reduced to 15-20 years leasing companies will need to increase the costs of leasing those trains to compensate for the shorter amount of time they will be a revenue making asset. Bad precedents are being set with this new train bonanza.

Firstly, there's a big difference between 20 years and 15 years on something that could be used for 35-40 years. As such if 15 years were to be the normal length that the trains were used for costs would go up quite a bit more than I was taking about. However I'm not aware of any fleet which is being scrapped after 15 years (maybe some of the 350's, but they are likely to find another home).

The point I was making was that although costs would go up for trains being scrapped after 20 years they may not be too much for a TOC to bear.

One of the things encouraging shorter life spans is the fact that a lot of stock from circa 2000 was smaller fleets (class 175, 180, 185, 22x, etc) or at least smaller fleets in each franchise. As such if they run out of usefulness others aren't so keen to take them on. However if you have a large fleet even if some end up being scrapped some will find more work. Which will push some costs up but not all.

It's worth noting that the big fleets )i.e. 450's) are due to carry on in service until well after they are 25 based on what we know now and may continue on beyond that as part of the next franchise. Even the 185's part of the fleet will continue in service for some time.

Even if the 22x's are stored from XC and EMT some are likely to continue to be used. For instance if you assume that the 220's get converted to 6 coaches units by scraping end coaches you are only taking about 25% of the fleet making it to 20 whilst the rest may make it to 30. Again this would mean that the costs would need to go up to cover the extra units lost, but not by as much as some fear.

However there's the limiting factor that is if someone else will offer a cheaper train then you can't set the price too high add otherwise your trains may not have any work. There's often people willing to undercut on cost of there's still a profit to be made, in that my small profit is better than your profit.

The train manufacturers don't care who they sell trains to as long as they get paid, if it's Bob and Co Leasing rather than one of the established companies chances are Bob and Co Leasing wouldn't get such a good deal from them. However over time having that extra competition will help keep prices down for TOC's but will result in lower profits for the leasing companies.

Personally I don't think that shorter lifespans of trains is a long term problem, as it's only really impacting on a limited number of fleets and for specific reasons. Once those stop being relevant the problem will go away until other factors cause it to come back again.

 

[Bevan Price]

IF the trains going for scrap only have scrap value why cannot they be leased very cheaply so we can have more services and more practically longer trains?

In some respects, there is an analogy with rents for high street shops. Property owners are reluctant to reduce shop rents, because some accountancy procedure imply that this reduces the nominal "value" of that property company. So, some of them are prepared to receive zero income from empty shops, rather than reduce rents to level that shopping companies can afford to pay.

 

[Taunton]

Indeed.
However I suspect that they will be comparing the £92m with whatever they paid to acquire their shares in the company, a price which would probably have assumed the ongoing profitable leasing out of the 350, 323 etc fleets. Given that Porterbrook seems to be owned by Foreign Institutions should we really care?

Well, with business annual costs of (simplistically) £385m and revenue of £477m, they can reckon the business is worth what they like, but it's a huge margin on the trading account. Once you see the Canadian provincial public sector pension funds well stuck in to the ownership of a UK business (at Porterbrook it's Alberta's fund) then you know it's just seen as a cash generator. Incidentally, the costs for the year to give the pre-tax profit are after the executive bonuses for financial performance are accounted for. So the actual trading margin is more.

The ownership does become relevant because when you have this in the hands of people who don't know one end of a train from the other, being only concerned with driving up their dividend take and ultimate asset sale value, and when they give the heave-ho to competent and long-experienced engineers the likes of Ian Walmsley, who they can't see on their spreadsheets in Calgary add any value to these, you then get project issues like the 458 overrun, the apparent non-progress of the 769, and such like, as the owners think that anyone who isn't a qualified accountant is worthless. Which all impacts back onto the UK railway business overall. And STILL their margins increase.

I see Chief Exec Mary Grant, quoted here, is stated as having a fine background at the likes of First Group, but maybe someone should ask Tim O'Toole why, once he joined them as Chief Exec, one of the first events was Ms Grant was leaving.

I do suspect that some financial simpleton at DfT has decided that since the ROSCOs were raking in such excessive margins, getting loads of new stock from alternatively-financed sources was the means to put the squeeze on them. That ultimately the extra (and substantial) cost will have to be paid somehow, from passenger fares or Treasury funds, seems to have passed them by.

There is also some government love affair with "new trains", as if they are somehow better. As they invariable seem to have notably less comfortable seats than their predecessors, less of them, and even regularly less reliability, these aspects are always not mentioned. mentioned. If you want to know what a comfortably-seated standard class open vehicle can be like, go to Didcot museum and sit in the 1935 GWR "Excursion stock" open vehicle, more pleasant ambience than anything coming out of a factory today despite having stood in the open for over 80 years.

 

[43096]

The ownership does become relevant because when you have this in the hands of people who don't know one end of a train from the other, being only concerned with driving up their dividend take and ultimate asset sale value, and when they give the heave-ho to competent and long-experienced engineers the likes of Ian Walmsley, who they can't see on their spreadsheets in Calgary add any value to these, you then get project issues like the 458 overrun, the apparent non-progress of the 769, and such like, as the owners think that anyone who isn't a qualified accountant is worthless. Which all impacts back onto the UK railway business overall. And STILL their margins increase.

You are on dangerous ground. As I understand it you are very, very wide of the mark on Ian Walmsley’s departure.

I see Chief Exec Mary Grant, quoted here, is stated as having a fine background at the likes of First Group, but maybe someone should ask Tim O'Toole why, once he joined them as Chief Exec, one of the first events was Ms Grant was leaving.

More made up rumour and innuendo. Perhaps she was smart enough to see how WorstGroup would continue its downward spiral into the cesspit it resides in today? Who knows?

 

[43096]

I agree with 43096's last bit (who wouldn't, apart from someone with shares in rolling stock manufacturers and no conscience?) but all the other stuff about repeating cliches, not understanding economics etc., is patronising crap,*

Sorry, but the nonsense posted on this thread basically comes down to profit = bad, they’re big bad nasty capitalists etc etc. That is just a total cliche. The reality is very different.

I don’t disagree that the structure of the industry is flawed, but the concept of leasing trains is not inherently wrong. If it was, why is there a growing industry in Europe doing just that?

 

[The Ham]

Sorry, but the nonsense posted on this thread basically comes down to profit = bad, they’re big bad nasty capitalists etc etc. That is just a total cliche. The reality is very different.

I don’t disagree that the structure of the industry is flawed, but the concept of leasing trains is not inherently wrong. If it was, why is there a growing industry in Europe doing just that?

I agree that profits aren't bad (anyone who works in the private sector, has a pension in the private sector or has suppliers in the private sector agrees with this, even if that supplier is Tesco and they are providing their dinner for that night).

There is a fine balance in regards to what is acceptable with regards to profits and how they are obtained. Too large a profit and others will try and join you in that industry. Too small and you will go bust.

Too hard nosed and profit centred and you'll likely loose staff and customers who you treat badly, too soft and you'll go bust.

Too much reliance on low paid staff overseas and if it found out that their conditions are terrible then you could go bust, conversely only employing people in the UK could result in you not making enough and you could go bust.

Of course there's always some who do the "wrong" (not necessarily ethical) thing and still make money whilst others that do the "correct" thing and still go bust.

The rolling stock leading companies are currently finding that due to the profits that they made they are facing more competition (which will likely result in smaller margins and lower leading costs) as there's a way into the market by providing new units.

The outcome of the extra competition will in the short term keep prices low (even if young trains are being scrapped), longer term it could result in some going bust of too many young trains are scrapped. However we are nowhere near that point and this is likely to just be a speed bump to profits and may not be of much note in the railway history books.

 

[Rail Blues]

Sorry, but the nonsense posted on this thread basically comes down to profit = bad, they’re big bad nasty capitalists etc etc. That is just a total cliche. The reality is very different.

Not true, what people myself object to is excess profits generated due to a disfunctional market.

Quite frankly, I'm done arguing the toss with you. You are seemingly not capable of posting without being rude, condescending or a combination of both and are seemingly hell bent on misrepresenting people's arguments.

Other people have called you on it here and you seem to go out of your way to be objectionable.

 

[whhistle]

Plays world's smallest violin

I'd be playing a big one.
Why make it small when you can make it a big one!
Another time there needs to be a like function.

 

[squizzler]

This is the fundamental problem - trains last longer than franchiess. However, most trains are leased only up to the end of the franchise and the ROSCO bears the risk of finding a further use for them.

That trains last longer than franchises is precisely why they are owned by Rosco's not the franchise operator. That risk of finding extra work is what the roscos are charging for. It's a feature not a bug!

One of the things encouraging shorter life spans is the fact that a lot of stock from circa 2000 was smaller fleets (class 175, 180, 185, 22x, etc) or at least smaller fleets in each franchise. As such if they run out of usefulness others aren't so keen to take them on. However if you have a large fleet even if some end up being scrapped some will find more work. Which will push some costs up but not all.

I agree that a lot of the early post privatisation train orders were bitty but ending up with a diverse range of badly conceived trains is not exclusively caused by rapacious capitalists. Many classes of Modernisation Plan diesels from the BR era went for scrap almost as soon as the steam locos they were meant to replace.

The market for rolling stock does not take place in a vacuum but is part of the mad ecosystem we call the railways. Public opinion plays a role - we all recall the lines of new trains unable to enter service because the power supply won't cope or some such. Image public reaction to nearly new passenger stock going or scrap! As people who care about it, we are right to be upset at seeing trains having unnecessary short service lives, but should direct our energies to getting more electrification and new lines built - creating demand for more trains - rather than moaning about the roscos or the operators.

 

[edwin_m]

The market for rolling stock does not take place in a vacuum but is part of the mad ecosystem we call the railways. Public opinion plays a role - we all recall the lines of new trains unable to enter service because the power supply won't cope or some such. Image public reaction to nearly new passenger stock going or scrap! As people who care about it, we are right to be upset at seeing trains having unnecessary short service lives, but should direct our energies to getting more electrification and new lines built - creating demand for more trains - rather than moaning about the roscos or the operators.

Public opinion played a more direct role in the howls of protest about "southern cast-offs", which probably has quite a bit to do with where we are now.

 

[whhistle]

This doesn't seem to bother the majority of people on here but if they have pensions they should care because the shareholders are effectively pension funds, that is Joe Public.

I'd suggest having shareholders is what is raping this country from behind.
Sucking money out of businesses, having this obsession that each year more profit should be made, companies sad they only made £60 million of profit this year compared with last...

This is just Porterbrook being annoyed that older trains aren't being leased anymore and companies want the latest and greatest.
I get that the new replacing new isn't great but it reads like they're moaning no TOC wants nearly new trains, because the TOCs want brand new.

Like mobile phones coming out twice yearly, or newer "better" laptops constantly being churned out.
Porterbrook were silly not to think this may happen to them too.

10-12% is a fairly typical general profit margin for businesses I think - it is rather in excess of that which does suggest some overcharging. Interestingly TOC profit margins (after subsidy) tend to be much lower, well below 10% usually.

And I'm sure I read supermarkets operate at even lower - 6% I think I remember reading?

 

[northwichcat]

The 387 order wasn't that speculative, they realised 110mph would be required on the GWML.
It was only speculative publicly...

I think it was a nice to have rather than a prerequisite, especially given by that time GWR had already secured the Thameslink 387s, so would have had both 100mph and 110mph units even without the speculative order.

 

[B&I]

Sorry, but the nonsense posted on this thread basically comes down to profit = bad, they’re big bad nasty capitalists etc etc. That is just a total cliche. The reality is very different.

I don’t disagree that the structure of the industry is flawed, but the concept of leasing trains is not inherently wrong. If it was, why is there a growing industry in Europe doing just that?

Have you ever asked yourself why an extremely profitable business has been allowed to grow up, beginning by exploiting public assets, and still dependent on piblic sector spending to keep it going, when the simpler and cheaper alternative would be for the public sector to own the trains ?