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1.011 Project Evaluation • Scotrail Electric Express Case Study • Lexcie Lu • MIT Center for Transportation Studies

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1.011 Project Evaluation • Scotrail Electric Express Case Study • Lexcie Lu • MIT Center for Transportation Studies Lexcie Lu, ScotRail Electric Express Case DRAFT – 4 March, 2003 1.011 Project Evaluation • ScotRail Electric Express Case Study • Lexcie Lu • MIT Center for Transportation Studies ScotRail Railways Ltd. is the major train operator in Scotland, operating trains on infrastructure owned by Railtrack plc under an Open Access regulatory regime. ScotRail is owned by the National Express Group, a large transportation holding company with bus, rail, coach, and airport operations in North America, Britain, Australia, and some parts of Europe. At present, ScotRail provides around 95% of all train services within Scotland as well as the Anglo-Scottish overnight Caledonian Sleepers linking Fort William, Aberdeen, Inverness, Glasgow and Edinburgh with the heart of London. ScotRail services are generally divided up into three different service groups: the “Express” network featuring self-propelled diesel trains linking major urban centers, the suburban network providing public transit services to the Glasgow and Edinburgh metropolitan areas, and the rural network covering the North and West Highlands as well as the South West of Scotland. During the Fall of 2000, a fleet of five class 322 high-speed electric trainsets became available as after being displaced from Stansted Express service which linked Central London to a satellite airport. Class 322, the last run of high-speed electric multiple units constructed by British Rail Engineering Ltd in 1990, was something of a one-off. Designed for a maximum speed of 100mph, the set features uprated hardware from the previous designs (class 320 and 321, with maximum rated speeds of 75mph and 90mph respectively). Thus, there are some commonality of parts between the class 322 and the fleet of class 320s currently operated by ScotRail on the Strathclyde PTE services. Built BREL York 1990 for Stansted Airport Service Power Supply 25kV a.c. overhead. Coupling Tightlock Bogies P7-4C + P7-4D (PMS), T3-7L + T3-7J (DTC), T3-7J + T3-7K (DTS), T3-7N + T3-7M (ATS). Traction Motors Four Brush TM2141B of 268kW. The Stansted Express franchise was owned by National Express, who had signed a ten-year lease contract with the rolling stock leasing companies for these four trainsets. The trainsets had become something of a maintenance anomaly in the Greater London area which is dominated by the previous BREL design, class 317 and 318. The company was eager to dispose of them. The lease contract was in its fifth year, with heavy early termination penalties. Reallocation of assets appeared to be a good option, although it was not clear precisely where the trainsets should go. This hypothetical case was written by Lexcie Lu for the purposes of classroom discussion, and was not based on any actual events. Any plans and opinions expressed herein do not represent the plans or views of either the parties concerned, or the Massachusetts Institute of Technology. MIT Center for Transportation Studies Page 1 Lexcie Lu, ScotRail Electric Express Case DRAFT – 4 March, 2003 Because of fleet commonality with class 320, and ScotRail’s existing commitment to the Scottish Executive Office of extending the Glasgow-Motherwell-Carstairs service through to Edinburgh, ScotRail has already committed to taking three of the five electric trainsets which will work on weekdays between Glasgow Central and North Berwick. The 100mph capability of the trainsets will be well utilized between Carstairs Jct. and MidCalder Jct. where the linespeed is 95mph and station stops are few and far between. The substitution of North Berwick service with new class 322 trainsets will allow a fleet of old and unreliable class 305 trainsets (built in the 1960s) to be retired. The fourth trainset would be retained as a spare to allow for maintenance and training. The question is, what to do with the fifth trainset? North Berwick Glasgow Central Edinburgh Waverley MidCalder Jct. Motherwell Carstairs To London and The South The Motherwell Proposal Motherwell is a town of 15,708 population (2000 Census) about 20 miles from Glasgow, well within the Greater Glasgow commutershed. At present, four train operators provide service between Motherwell and Glasgow, with the following frequencies and journey times: Train Operator Route Frequency Journey Time Great North Eastern Railway Uddingston every hour 15 mins Virgin West Coast Uddingston every 2 hours 14 mins Virgin CrossCountry Uddingston every 2 hours 14 mins ScotRail PTE Business Unit Hamilton every 30 mins 33 mins ScotRail PTE Business Unit Bellshill every 30 mins 28 mins It was noted that while the long-distance operators (GNER, Virgin) provided high-speed service, the frequencies were infrequent and irregular, therefore not suited to service what is now an all-day commuter and leisure market. On the other hand, while ScotRail’s two PTE services, which are operated under a fixed-cost contract to Strathclyde Passenger Transport Executive (the local transit authority), offers a combined frequency of every 15 minutes, the journey times are terrible, taking twice as long as the express carriers to reach Glasgow. The fixed-cost contract meant that ScotRail had no revenue responsibilities for the PTE sector, and simply had to deliver whatever timetabled services that the PTE had asked for, collecting all revenue (which belongs to the PTE). Thus, a ScotRail Electric Express service was proposed between Glasgow and Shieldsmuir, a point 8 minutes south of Motherwell featuring a large Park & Ride lot and convenient turn-around facilities. The trainset will be able to make the one-way journey in 23 minutes. Allowing turn-around times of 5 minutes at MIT Center for Transportation Studies Page 2 Lexcie Lu, ScotRail Electric Express Case DRAFT – 4 March, 2003 each end, one trainset can provide an hourly service between Shieldsmuir, Motherwell, and Glasgow Central. The General Manager of ScotRail asked the Heads of Traction & Rolling Stock Department and Traffic Department to investigate the feasibility of providing such a service, who came back with the following cost estimates associated with the service: per unit annual unitsunit Total Rolling Stock Lease Cost $135,000 4 cars $540,000 Track Access $2 225,000 miles $450,000 Crew $20 9,000 crew-hrs $180,000 Fuel (included in track access costs) Rolling Stock Maintenance (included in maintenance plan for other 322s) Total Annual Cost to Company $1,170,000 Concerned about the company’s ability to meet these costs from its revenues, the General Manager also asked for some revenue projections. As the company did not have expertise in forecasting revenue, it was decided to forecast the revenue based on the old British Rail practice. The British Rail ticketing and reservation systems kept track of the number of tickets sold each month by ticket machines systemwide. The tickets issued have the following information: originating station, destination, and time purchased. As the tickets were not carrier-specific, it was impossible to tell if a specific ticket was cancelled on a train run by a specific operator. British Rail thus allocated the revenue to different operators based on a formula that takes into account the number of trains per day offering journey opportunities between given origin and destinations, and the journey time. For the purpose of these projections, we will assume that by introducing this express service, the ticket sales on the Glasgow-Motherwell corridor will increase by 15% above the existing levels. With those data, the Marketing Department came up with the following revenue projections: Motherwell-Glasgow Central (Before) Train Operator tpd JTimeF RevAttrF RevAttr% Revenue Great North Eastern Railway 14 1 14 21% $1.32m Virgin West Coast 9 1 9 14% $0.85m Virgin CrossCountry 7 1 7 11% $0.66m ScotRail PTE Business Unit 72 0.5 36 55% $3.39m Total 66 $5.40m Motherwell-Glasgow Central (After) Train Operator tpd JTimeF RevAttrF RevAttr% Revenue Great North Eastern Railway 14 1 14 17% $1.04m Virgin West Coast 9 1 9 11% $0.67m Virgin CrossCountry 7 1 7 8% $0.52m ScotRail PTE Business Unit 72 0.5 36 43% $2.66m ScotRail Electric Express 18 1 18 21% $1.33m Total 84 $6.21m The General Manager determined that a revenue of $1.33m, given that no one else wants these trainsets and he could have them at the rock-bottom leasing cost of $135,000 per year per vehicle, represents a reasonable risk. Wary of the public’s reaction to ScotRail’s attempt to increase profits by launching a new service in a climate of general commuter discontent due to old and depilated trains elsewhere on the system, the General Manager holds a public hearing, only to find commuters are strongly supportive of his proposal. “I can cut my commute time in half”, says one commuter from Motherwell, “and I don’t even have to wait for MIT Center for Transportation Studies Page 3 Lexcie Lu, ScotRail Electric Express Case DRAFT – 4 March, 2003 the 8.17 Intercity Express to show up, now I have so many local trains to choose from.” He therefore proceeded to give the notice of intent to increase train service to Railtrack, the track owner. Unbeknown to him, a freight operator has also been eyeing up the spare capacity between Glasgow and Motherwell as it would serve as a useful diversionary route for coal trains coming from the Ayrshire ports. Assignment Read the case. This should take no more than half an hour. Come to class be prepared to discuss the following questions: • Should the General Manager proceed with the service plan? • If you’re the Head of Train Operations at Railtrack, how should you decide whether
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