MINISTERS yesterday awarded transport firm National Express the new East Coast rail franchise amid fears over fare hikes and questions over the £1.4bn price tag of the deal.
The bus-to-train operator promised world-class services, including faster trains and station upgrades, when it takes over from current operator GNER in December under a contract with the Government running up to March 2015.
National Express beat competition from Arriva, First Group, and a partnership of Virgin, Stagecoach and GNER to win the prestigious franchise – with promises of extra parking spaces to attract motorists to the railways and more services.
But warnings were sounded over National Express promising to pay the Government £1.4bn for the right to run services, which link the region with London and Scotland.
GNER offered £1.3bn when it won a new franchise in 2005, only to see that deal torn up last December when the company said it could not meet its obligations.
Unregulated fares – generally off-peak tickets – are expected to rise by an average of 2.1% above inflation a year.
Regulated tickets, like season tickets and savers, will go up by 1% cent above inflation a year.
Customer watchdog Passenger Focus warned a standard open return from Newcastle to London could rise from £226 to £327.70 by 2015. Passenger Focus manager Guy Dangerfield added: “While we welcome transparency from the Government that unregulated fares are likely to rise by 2.1% above the rate of inflation each year, we are concerned that at current inflation rates this could amount to a 45% price increase over the length of the franchise.”
He welcomed moves to increase passenger satisfaction and punctuality to 90%, but warned plans to increase capacity must be pursued with “vigour” to ensure they went ahead.
Berwick MP Alan Beith said he wanted an early meeting with National Express, adding: “GNER’s high service standards needed to be maintained.
“I am particularly concerned that National Express will be paying an even higher premium to the Government than the premium GNER found themselves unable to pay,” he added.
He also expressed concern about the potential fare increases and called for GNER’s many “outstanding” staff to be employed in the new franchise. The North-East Chamber of Commerce said it was delighted a year of “limbo” was now over but warned the route was too important to be run as a “budget service”.
Transport advisor Rebekah Gaze added: “What is of paramount importance is that prices remain competitive and cost effective. The Government is encouraging people to use public transport instead of cars to ease congestion. It cannot, therefore, allow passengers to be priced off the rails.”
Chris Stokes, from National Express, said it was “very confident” it could meet the premium payment, producing a sensible return for it and a good deal for the Government with major service improvements.
He stressed revenue growth will be driven by higher passenger numbers which are only possible with “reasonable” fares.
Rail Minister Tom Harris said fare rises were “significantly less” than under other recent franchises.
Customer is top priority for operator
NEW East Coast rail boss Richard Bowker has promised travellers better services from the moment they buy tickets.
National Express chief executive Mr Bowker said he was committed to improving on GNER’s services and not going backwards when he spoke to The Journal in March.
“People should be very confident that we will have the customer at the very heart of our bid,” Mr Bowker said then.
He also promised National Express would build on services across the board from purchasing tickets to the experience of passengers on trains.
Mr Bowker also signalled potential changes to catering services, saying they needed a “good look” with some of the provision being very good but that other areas could be improved.
But he declined to go into details to avoid tipping off his rivals.
The train boss also spoke out about concerns that planned station upgrades could falter under the new franchise.
“We will look at everything that was being discussed before and if things are right and make sense, and customers want them, then we can take them forward,” said Mr Bowker.
The National Express chief also urged passengers at the time to outline their views about the future of services.
Firm is confident over £1.4bn payment
NATIONAL Express has insisted it can pay a promised £1.4bn to the Government over the lifetime of its franchise.
Berwick MP Alan Beith expressed concerns the firm will be paying more than GNER, who last year handed back its franchise after warning it could not pay £1.3bn as promised to the Government for the right to run services.
GNER said at the time that its revenues has been hit by the July 2005 bombings in London, higher electricity prices and a rival operator being allowed onto the East Coast Main Line.
But Chris Stokes, National Express’s head of rail bidding, said it was “very confident” of its business plan and added the franchise – beginning in December and running until March 2015 – was not the same as that awarded to GNER in 2005.
He said the company’s bid was based on an increase in services from December 2010, which would create an extra 20% capacity for passenger growth and deal with overcrowding – although it will need to formally confirm with Network Rail and industry regulators that space will be available on the tracks.
“If you compare the profile of the GNER bid adjusted for inflation, we are slightly behind the GNER numbers until that capacity cuts in and then we are slightly above,” said Mr Stokes.
He added the company would be providing competitive fares with journey times cut on many trains, which should provide an attractive deal for passengers.
The London Olympic Games in 2012 would help generate business with growth further driven by a redevelopment by rail chiefs of London’s King’s Cross station to create a “world-class” transport hub with neighbouring St Pancras, which houses the new Eurostar terminal.
Referring to the franchise deal, Mr Stokes added: “We are very confident of this. It is going to produce a sensible return for us and it is a good deal for Government, too.
“And we are going to raise all aspects of the quality of service on the route both on trains and stations.”
Industry expert Roger Ford, who writes for Modern Railways, said the premium could be delivered if the economy continued to grow.
He also said the company was protected by the “cap and collar” regime later in its contract, whereby it would share any revenue raised above target with the taxpayer while the Government would help shoulder any losses if less money was made than expected.
A Department for Transport spokeswoman said all bids submitted were subject to stringent deliverability tests.
The cash handed over will go into the Government’s rail budget.
GNER name is consigned to the past
IT is a name known to millions of passengers, but GNER could disappear after losing out on the East Coast franchise.
GNER was one of the original private train companies when it began running services on the prestigious East Coast Main Line, linking the North-East with London and Scotland, in 1996.
The route carries more than 17.4m passengers a year and generates hundreds of millions of pounds in revenue. GNER has also won a reputation for high-quality services and employs 3,100 staff across the 920-mile route.
York-based GNER won a new 10-year franchise in 2005 – although concerns were raised about whether it could pay the £1.3bn promised to the Government for the contract.
Its Bermuda-based parent company Sea Containers also filed for bankruptcy protection in the US last year.
GNER then warned it would be unable to meet its payment obligations and a renegotiation was not possible after it was “knocked sideways” by the July 2005 London bombings, higher electricity prices and a rival being allowed onto the East Coast route.
Its franchise was replaced with a temporary contract with the Government last December, while a new operator was found. Yesterday it was unveiled as National Express.
The winning bidder said it expected to call its service National Express East Coast featuring a more contemporary image and new staff uniforms.
A GNER spokesman said it would not be bidding for any more franchises. It said it would in effect no longer exist once staff and operations transferred to National Express, which will make the decision on the future use of the GNER name.
Chris Stokes, National Express’ head of rail bidding, said he was unsure what the crest on GNER trains meant in the 21st Century while a final decision on whether to repaint trains had not yet been made.
GNER chief executive Jonathan Metcalfe pledged to work closely with National Express to ensure a smooth handover and put passengers first to create an even better railway.
He added National Express would inherit a high-performing and fast-growing railway with fantastic staff and an enviable reputation for high service standards.
Bob Mackenzie, Sea Containers chief executive and GNER executive chairman, said it was a “sad day” for passengers, staff and associated businesses.
He said the company never breached its contract, but voluntarily agreed to a management contract as unforeseen circumstances and a hike in payments to the Government meant it risked losing £50m.
Mr Mackenzie expressed disappointment over the Government’s rejection of its “strong and robust” joint bid with Stagecoach and Virgin.