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Passenger Rail Franchising – British Experience

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Passenger Rail Franchising – British Experience Passenger Rail Franchising – British Experience Chris Nash and Andrew Smith ITS, University of Leeds ECMT Workshop on Competitive Tendering for Passenger Rail Services Paris, 2006 Passenger Rail Franchising – British Experience 1. Alternative approaches to franchising 2. The Franchising Process 3. Impact on Revenues and Costs 4. Conclusions Rail Privatisation in Britain • Privatised regulated infrastructure manager • Outright sale of rail freight operators • Franchising of passenger services • Sale of rolling stock leasing companies Alternative Franchising Models Franchising Body Franchise Length Nature of (yrs) competition OPRAF 7 Minimum subsidy for at least minimum services SRA 20 Major investment proposals, SPVs SRA/DfT 7 + 3 Tightly specified service and performance specifications Initial Franchisees Connex (2) National Express (5) First (2) Prism (4) GB Railways Sea Containers Go Ahead (2) Stagecoach (2) Laing Virgin (2) MTL (2) Rail Passenger and Freight Volumes (1979 to 2004/05) 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 Billion5.0 Passenger Km and Billion Freight Tonne Km 0.0 Passenger Kilometres 1979 1980 Sources: Transport19 8Trends,1 2002 Edition, Department For Transport and National Rail Trends, SRA Post-privatisation period 1982 Freight (Net) Tonne Kilometres 1983 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 Post- 1991/92 Hatfield period 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 Subsidies to Passenger Train Operators (including performance incentive payments) (£m, 1997/8 1998/9 1999/00 2000/1 2001/2 2002/3 2003/4 2003/4 prices) Total 2,046 1,717 1,470 1,223 1,315 1,273 1,990 Projected 1,994 1,758 1,499 1,323 1,192 984 subsidy from initial bids Note: projected subsidy levels exclude performance bonuses and penalties and any changes to track access resulting from the 2000 Periodic Review. Source: SRA Annual Reports and Statistical Yearbook Profitability of TOCs 1999/2000 £m % of turnover Inter City Operators 90.8 5.5 Network South East Operators 93.7 4.7 Regional Operators (6.2) (0.4) Of which (5.1) (2.1) North West Trains Wales and West (12.6) (9.6) Cardiff Railways (4.9) (18.8) TOCs subject to re-negotiated franchise agreements or cost-plus contracts Cardiff Railways Sept 2000 – Dec 2003 (cost-plus contract) Central Trains 2001-2004 (re-negotiated) South Central 2001-2003 (cost-plus contract?) South Eastern 2002-2003 (re-negotiated) Virgin Cross country From 2002 (cost-plus contract) C2C 2001-2011 (re-negotiated) Merseyrail 2001-2003 (cost-plus contract) Arriva Trains Northern 2001-2004 (cost-plus contract) North Western 2001-2004 (cost-plus contract) Scotrail 2001-2004 (re-negotiated) WAGN From 2001 (cost-plus contract) Wales & West From 2001 (cost-plus contract) Virgin West Coast From 2002 (cost-plus contract) Outcome of Refranchising TOC Original Franchisee Outcome of Refranchising Anglia GB Railways NE Chiltern M40 Laing M40 Laing South Central Connex Go Via South Eastern Connex Go Via Great Eastern First NE GNER GNER GNER Great Western First First Merseyrail Arriva* Nedrail Northern Spirit Arriva* Nedrail Scotrail NE First Thameslink Go Via First Wales-West NE* Arriva * Having taken over previous incumbent Impact of External Variables on 1990-1998 Rail Demand Growth London Non London South East GDP 1.301 (1) 1.196 (1) 1.149 (1) Car Time 1.043 (4) 1.031 (4) 1.067 (3) Fuel Cost 1.045 (3) 1.056 (2) 1.049 (5) Population 1.038 (5) 1.022 (6) 1.055 (4) Car Ownership 0.975 (6) 0.951 (3) 0.972 (6) Post 1995 Trend 1.119 (2) 1.033 (5) 1.092 (2) Total 1.606 1.307 1.440 Growth in TOC Costs Drivers of TOC cost rises 2003/04 Post-HF (£m, 2003/04 prices) % growth TOC own costs 3,097 47.5% - Of which, staff costs 1,376 32.7% - Of which, other costs 1,720 62.0% Average salary 30,426 14.6% Headcount 45,236 15.8% Passenger train km – million 446 6.6% Passenger km – billion 40.9 6.2% Conclusions 1. High competition for franchises 2. Healthy growth of traffic and revenue 3. Costs have risen 4. Problem of loss making TOCs.
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