Rail operator given Government warning
THE future ownership of East Anglian passenger train services has been plunged into uncertainty after the Government threatened to strip National Express of its franchise.
THE future ownership of East Anglian passenger train services was plunged into uncertainty yesterday after the Government threatened to strip National Express of its franchise.
The dramatic move came after the public transport giant effectively walked away from its National Express East Coast (NXEC) franchise in the face of multi-million pound losses.
Transport Secretary Lord Adonis said he was setting up a publicly-owned company to take over the East Coast line, from London's Kings Cross to Edinburgh, when NXEC ceased to operate the franchise - probably by the end of this year.
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Lord Adonis said the Government planned to tender for a new East Coast franchise operator “from the end of 2010”.
And he warned that the Government may now have grounds to terminate the group's other rail franchises - National Express East Anglia and London-Tilbury-Southend operator c2c.
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“It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging,” he added.
However, National Express - which also announced yesterday that chief executive Richard Bowker was leaving to take up a job in the Middle East - said the problems at NXEC would not affect its other franchises and insisted the Government would have no justification for ending them early.
National Express agreed to pay the Government premiums of �1.4billion over the lifetime of the East Coast franchise in a deal struck in 2007 - before the start of the recession.
With revenue growth having failed to meet expectations, NXEC now faces mounting losses which, in a trading update yesterday, National Express said totalled �20million for the first half of the year alone.
The group - which earlier this week rejected a takeover approach from rival FirstGroup - added that discussions with the Department for Transport (DfT) had failed to secure any improvement in the outlook for the franchise.
As a result, the financial support which the group was committed to provide for NXEC under the terms of the franchise was expected to become exhausted later this year, with the DfT reassuming control of the franchise.
Conservative MPs rounded on the Government, claiming that the decision to award the East Anglia franchise to National Express had been flawed from the start.
North Essex MP Bernard Jenkin said: “Part-nationalisation of the East Coast line and the threat over the Anglia franchise is proof the Government got it wrong when they let the franchises to National Express.
“At the time, their inflated bids knocked out the very well run GNER on the East Coast Main Line and First Great Eastern on the Liverpool Street-Colchester-Norwich line. Our line used to be run extremely well by one of the most respected professional railwayman, Bob Breakwell, but Labour were determined to accept the highest bids.”
West Chelmsford MP Simon Burns added: “At the time of the negotiations over the contracts to run the rail service from Chelmsford to Liverpool Street, I argued that the franchise should not be taken away from the then operators because they were providing a reasonable service.
“As a result of the Government's need to generate extra income, they disregarded any arguments to the contrary and gave the contract to National Express.”
The possible termination of the NXEA franchise drew a mixed response from rail user groups in the region.
Rod Lock, secretary of the East Suffolk Travellers' Association, said he was against such a move, with NXEA currently meeting its franchise commitments and achieving punctuality levels well above 90%.
“You can't fault them there and probably for local services punctuality is even higher,” he added.
However, Neil Skinner, chairman of the Manningtree Rail Users' Association, said the situation represented an “ideal opportunity” to re-award the franchise on better terms, with the current deal making it hard “for anybody to actually deliver a good service to passengers and fulfil the terms of the franchise financially”.
David Bigg, chairman of the Witham and Braintree Rail Users' Association, agreed that National Express should be stripped of the NXEA franchise, but as part of a wider restructuring of the rail industry.
“We have always argued against breaking up the network into operating companies and infrastructure,” he said. “We refer to it as a many-headed monster.”
However, he added: “As a performance, it has not done badly. The performance has been quite good and we have a good working relationship.”