Return to Archive -by date - by topic - 2000 Archive.
OK, Sir Alastair, you were right, franchise replacement really can come up with strategic vision – but can you make it
When you look back at franchising, Virgin was the one shining light amid the encircling gloom when it came to moving the railway forward. Even though delivery went backward until Chris Green returned to the fray, the Virgin Vision © for both the West Coast Main Line and Cross Country was uniquely ambitious.
In both franchises, big numbers with pound signs in front abound. And while Virgin won't be spending its own £940million on train fleets, it does have to pay train rentals and maintenance costs, plus extra track access charges for upgrades. If the passenger forecasts fail to materialise, or if someone doesn't deliver on time (no I'm not looking at you, Gerald), Virgin Group and its 49% partner in Virgin Rail Stagecoach are in deep schtuck.
And now, Virgin is competing for the InterCity East Coast franchise against incumbent Sea Containers. The core of Sea Containers' franchise replacement bid is 25 tilting trains plus three Parkway stations and 140mile/h in 2009. Supporting this is the best passenger service around, their maintenance guys are doing wonders with the IC225 fleet and their buffet cars serve top scoff, including my favourite, toasted ciabatta sandwiches.
With Virgin falling well short of GNER on customer service, their shortlisting for the East Coast bid was greeted with incredulity. How could anyone even contemplate handing over GNER to the bearded knight who had made the WCML the butt of a new genre of anti-Branson jokes?
So, when the Virgin East Coast bid team invited me to Euston for a detailed briefing on their proposal, I assumed they were planning to beat the ciabatta sandwich factor with some variation on their West Coast franchise formula. Oh me of little faith.
Virgin Trains' bidding team is made up of Richard Bowker, who led the West Coast and Cross Country train procurement and funding exercise for Virgin, Will Whitehorn, Richard Branson's top PR honcho and dedicated Modern Railways reader, Brian Cox, Stagecoach's in-house rail man and Jim Steer of consultants Steer Davies & Gleave. It was, of course, a meeting between Will and Jim that got Virgin into franchising in the first place.
Why no one from Virgin Trains' operational side? The Shadow Strategic Rail Authority has laid down strict ground rules for franchise replacement bidding teams – only the incumbent can use his own staff. This may seem a bit harsh, but if you were Mike Grant, would you want one gramme of Chris Green's megatonne capability diverted from making Virgin's existing franchises happen? Quite.
All this might seem a mountain to climb, but only if Virgin chose to play the same game as Sea Containers. Instead the aim is to steamroller their rival's new trains and stations with 120 miles of 205mile/h high speed line, 55-60 high speed trains and extra capacity for all users of the route. Gulp.
But before discussing the considerable implications, some details of the Red Team's thinking.
With a potential 20-25 year franchise period Virgin were able to think strategically. On the WCML they had learned the hard way that tilting trains running at 140mile/h are bad news on a multi-user railway. So, in Blairspeak their priorities were ‘capacity, capacity, capacity'.
But, on a route where current airline earnings are twice the intercity rail revenue, you couldn't let capacity (ideal: all trains running at the same speed) compromise competitiveness (ideal: Virgin trains running as fast as possible).
And capacity will still be an issue even after Railtrack's current ECML upgrade. Virgin's studies suggest that adding tilt at 125mile/h would cost one path an hour and running at 140mile/h takes another. Plus, as studies over the years have shown, the journey time benefits of going from 125 to 140 are relatively small.
Yes, yes, I know that I am one of the few people to have travelled by rail from London to Edinburgh in under 210minutes, but that was a balls out special with other trains pushed out of the way.
So extending the West coast Pendolino build and tweaking the ECML was ruled out. But if upgrading the existing ECML (Classic route in Virgin-speak) would give you not a lot of dash for quite a lot of cash, and if the Shadow Rail Authority was looking to franchise replacement to provide the missing Strategic bit, the way forward became clear. Just as it was obvious to French Railways 30 years ago.
I am indebted to my old Chum Gordon Pettitt for the reminder that the justification for the Paris- Lyon Ligne a Grande Vitesse was not vitesse, but capacity. This followed 4% traffic growth a year on a four track railway with two sections of expensive to quadruple double track.
Thus, at the heart of the Virgin franchise bid is 105miles of new high speed line, laid out for 330km/h (205mile/h), running parallel to the existing route between Connington south of Peterborough and Colton junction north of Doncaster,
A second, 14mile section of high speed line would run between Killingworth and Chevington , bypassing the curves around Morpeth.
After the new High Speed Line opened, the Classic ECML would remain as a 125mile/h multi-user railway. There would also be some strategic electrification giving existing routes access to the high speed line.
This is best seen on the map, but note in particular the spurs to Leeds and Sheffield . The effects of these show up in the journey time table.
| Today(h.min) | 2009(h.min) | Average speed (mile/h) | |
| Edinburgh | 3.59 | 3.15 | 122 |
| Newcastle | 2.36 | 2.00 | 135 |
| Leeds | 2.02 | 1.25 | 135 |
| Sheffield | 2.10 | 1.15 | 128 |
Note too the restoration, upgrade and electrification of the Leamside line. This becomes the new ECML, with a Washington Parkway station serving Durham and Sunderland . This would be only three miles from the planned terminal of the Sunderland extension to the Tyne & Wear Metro.
At the southern end the Peterborough-Ely line is electrified, giving access from the north to Stansted Airport and, perhaps more importantly, access between the Classic ECML and the East Anglian ports for freight.
Virgin estimates the infrastructure cost of its High Speed Line North East(HSL-NE) at £3.3bn. It would probably be funded through a Special Purpose Vehicle (SPV).
SPV is a City term for a financial scheme to fund investment in rail infrastructure independently of Railtrack. This is a TLA we could be using a lot in the coming months.
Funding could include contributions from the Virgin Rail partners and Bechtel, with which a Memorandum of agreement has been signed on the East Coast scheme. But the bulk would take the form of long term debt.
At this point, we put euphoria on hold. This investment would have to earn a return, in the form of additional track access charges. Initially, at least, such charges would need to be topped up with substantial Government subsidy.
How much subsidy? At present, GNER's track access charges are around £150million a year out of revenue of £300million a year. Subsidy will fall to under £5million in the coming financial year.
Against this, the owner of HSL-NE would have to earn around £350million a year just to service the investment in the line. Meanwhile Virgin would still have to pay Railtrack for the use of the ECML south of Peterborough and North of Doncaster – not to mention its IC225 stopping services. Since HSL-NE bypasses just under a third of ECML-Classic, on a pro-rate basis Railtrack would be looking for around £100million minimum a year plus a contribution to the planned capacity enhancements.
All this before Virgin starts paying 8% a year on whatever a fleet of 55-60 Channel Tunnel compliant high speed trains costs and some Super Voyagers
So the scheme assumes some chunky Government subsidy, presumably justified on social cost benefit analysis, but not as much as you might think. The really heavy charges aren't felt until 2009. And if you assume 5% compound growth and some interim enhancement benefits from the Super Voyagers and the initial batch of VGV, the subsidy looks a lot less daunting than the additional costs might suggest.
Certainly, Virgin claims that their preliminary analysis shows that over a 20-25 period, the Net Present Value of the subsidy profile is positive. This must assume that the new line will win much of the airlines' £600million revenue on the route – which is what happened on Paris-Lyon.
But don't forget the premium that Virgin will be paying for its West Coast franchise. This will be £170million in 2009 which on my calculations could subsidise the East Coast in that year – with something to spare. More on this next month
Meanwhile, Railtrack would still continue with its existing ECML upgrade, for example the quadrupling of the Welwyn bottleneck and the Hitchin grade separation, but the substantial costs of raising the line speed to 140mile/h would be saved.
Virgin estimate that HSL-NE could save around a third of £1.6bn cost of the full house ECML enhancement. But there would still be extra track access charges to pay to cover the remaining expenditure.
After the experience with PUG2, Virgin was not going to be caught between Railtrack and other operators again. All the other users of the ECML, except GNER obviously, have been consulted and are said to be supportive.
How supportive? Well, at the back of the submission document is an appendix containing letters of support for the scheme from Prism (WAGN), GB Railways (Hull Trains), National Express (Midland Main Line and Central Trains) and EWS.
And the more you explore the multi-user possibilities, the sexier the scheme seems. For example, start with the Midland Main Line being able to offer a blistering 1hr 15m min London-Sheffield timing compared with 2hr 10min on the MML itself.
What does that do? It frees up capacity on the MML, which could encourage the development of the MML as the southern end of a new Anglo-Scots freight route.
And what if more freight trains go up the middle? Why it relieves pressure on the WCML.
For those of us who believe in the future of railways this is the sort of grand vision Britain has been missing. But how will the Government and the SSRA handle it?
It will be impossible, particularly with the next election fast approaching, for the Government just to say ‘no'. But, the Treasury will resist putting up, or underwriting Channel Tunnel Rail Link style, a large part of that £3.3billion.
Equally, I reckon that Virgin have under estimated the local resistance to the scheme, even if, as they claim, it does run largely through farmland owned by the financial institutions. In any case the Transport & Works Act procedure makes 2009 seem optimistic.
So, I reckon that the political solution from the DETR's Sir Humphrey will be along these lines: ‘You must welcome this exciting proposal Deputy Prime Minister, but point to huge implications for transport policy, mustn't rush such crucial decisions, must improve the route short term, Sea Containers are offering more trains for a 10 year franchise, have to consider value for money, so you are minded extend GNER's franchise to 2010, meanwhile set up joint DETR/SSRA/Virgin/Bechtel/Railtrack task force to take the scheme forward urgently, I think you will find that's defused the Branson problem'.
Excuse my cynicism. Virgin has come up with the sort of additional to the nation's infrastructure that state railways have become expert at promoting and implementing. It is hard to see how the privatised railway, torn by internal rivalries, can really take it forward: Railtrack is already spinning against it.
We are about to see a defining moment for Sir Alastair Morton and the SSRA.
What do we call it?The French say Ligne a Grande Vitesse, the Japanese Shinkansen, the Italians Diretissima, the Germans Neubaustrecke. So what do you call a new generation high speed line in English? All ideas better than High Speed Line gratefully received and plagiarised. |
For operation on the high speed line there would be a fleet of 55-60 non tilting 205mile/h trains. These would be delivered in two phases.
An initial batch of 15 units would enter service from 2005, with only one electric power car. Possibly in an attempt to get me on-side, Will Whitehorn mooted possibility of coupling an IC125 power car at the other end for added urge.
These power cars would have come onto the lease market as a new fleet of stretched (9-10car) Super Voyager tilting diesel electric multiple units replace the InterCity East Coast IC125 fleet from 2003.
Even Captain Deltic is not convinced that the aural delight of 10 Cummins 19 litre engines totalling 7,500hp storming Stoke Bank would compensate for the cost and complexity of 60 pistons in one train. He offers two solutions.
Either you power five or six cars and have a diesel generator providing hotel power under the rest, or you have a big, butch Co-Co diesel loco at one end (Oh no, not again, Ed).
Super Voyagers would enhance services North of Edinburgh, where the Virgin team think that Aberdeen and Inverness have a raw deal at present. They could also provide precursor services on the routes to be electrified.
An undefined ‘large proportion' of the IC225 fleet would be refurbished for use on Classic ECML stopping services. Talks have been held with Prism who could use the remaining sets running at 125mile/h. Or they might be of interest to Anglia.
As for the High Speed Trains, which Virgin would like us to call VGV (Vierge a Grande Vitesse), while the mind immediately turns to thoughts of TGV, there are some sexy alternatives in Europe and Japan and a fleet that size, probably with a maintenance contract, is worth fighting for.
What might give a TGV clone the edge is the requirement for the new trains to be Channel Tunnel and European compatible. By 2009, the Channel Tunnel Rail Link could be open into St Pancras, offering some attractive onward journey times to Paris/Brussels.
Also not to be overlooked is the beneficial effect on lease rentals of trains that could, if the worst came to the worst, find work elsewhere in Europe
Finally to extend the VGV north of Edinburgh, Virgin would emulate GNER's proposal and buy up to 10 4,500hp diesel locomotives. This generated much ribaldry in Capt Deltic's direction at the railway press briefing. But I note that the number has already shrunk from 10 at that session to five in the press release.