Big news in the rail industry at the moment is the
renationalisation of the East Coast Mainline, after National Express managed to cock up running it in a most spectacular fashion. It shows how utterly crazy transport policy is in this country - the ECML has seen two franchise holders fail in two years, despite almost every train being wedged full of passengers, in many cases paying through the nose for their journeys. The route makes huge amounts of money, at least in theory - but two franchise holders have more or less gone bankrupt running it.
When it was first privatised in 1996, GNER took over and did a spectacularly good job. They were almost universally admired and did a lot of things right. They recognised that British Rail had done a pretty good job and adopted an "if it ain't broke, don't fix it" approach. They adopted a stylish and traditional livery and image, and provided superb customer service. Things went a bit wrong when the franchise was re-let. GNER kept hold of it, but the government decided they wanted vast amounts of the cash the line was making, and encouraged bidders to offer huge premium payments for the privilege of operating it. GNER promised to pay around £1bn to the government over the course of ten years to run the line, which raised a few eyebrows, but times were good and people thought they'd manage it. However, within a short space of time, energy bills shot through the roof, and GNER's parent company, Sea Containers, ended up in serious financial trouble. They couldn't keep up the payments, and effectively had the franchise repossessed, although the government recognised they'd done a good job and let them keep it until National Express were ready to take it over. Lots of people were sad to see GNER go, and I was one of them - I liked them a lot.
National Express were desperate to win a premier franchise - they'd lost quite a few, and stopped at nothing to get East Coast, bidding
even higher than GNER, using a business model that needed growth of 10% a year. Insane! Loads of people said it was at the time, and lo and behold, along came recession and National Express were completely screwed. The whole National Express empire is in a mess, and they officially gave up in July. The government has refused to renegotiate - quite rightly so, because all the other franchises would demand easier terms if they did - but they remain culpable by setting up a franchise system that encourages such stupid behaviour. Richard Bowker, the boss at National Express who sanctioned the stupidly high bid, has sloped off to run a railway in the United Arab Emirates, and Lord Adonis - the first transport minister in years to actually know what he's talking about - has hinted strongly that NEx will never win another franchise again. They still have two that are making money, but Lord Adonis has hinted they will be taken off them - it's a classic illustration of what's wrong with the franchise system when a franchise holder can keep hold of profitable lines, but can dump loss-makers with no real consequences. Apparently, National Express are liable for £72m by walking away early, but they leave a £1bn hole in the government's transport budget as a result of their idiocy.
Needless to say, things turned sour for National Express very quickly, given the downturn in the economy. Passenger numbers are still high, but growth has levelled off dramatically, and passengers are switching from first class to standard, and from open tickets to cheap advance-purchase ones. They immediately did very unpopular things like reduce catering, and introduced fees for seat reservations. It didn't do any good, though, and I think they're still surprised that the government gave them such short shrift. I'm glad they did, though - they messed up spectacularly badly and have been made to pay the price. I still don't see anyone trying to fix the franchise system, though - it's ridiculous that such a busy route should have bankrupted them. It's because it's been treated as a cash cow both by NatEx and the government, instead of being run as an essential public service.
Of course, now it's in government hands, there's no obligation for them to come up with huge premium payments, although the whole thing will still be expected to run at a profit. It's now headed up by Elaine Holt, formerly of First Capital Connect, who is well-known for being ruthless and hard-nosed. She's appointed another senior manager from within FCC, which is interesting - FirstGroup would kill to get the franchise when it's re-let in a couple of years' time. I sincerely hope that under state control the line does so well that people will resist it being privatised again, although we're almost certainly about to get a Conservative government that will privatise everything in sight, including the Royal Mail, the NHS, schools, Network Rail etc. The Conservatives are, of course, responsible for the bulk of the stupidity in the rail industry. Labour have fixed a few things here and there, but have largely failed to address the real problems, and now it's far too late for them to do anything about it.
National Express are desperate to try and salvage something, and clearly they took the marketing database with them before they handed East Coast back. I got an e-mail thanking me for travelling with East Coast, and offering me a 50% discount on my next coach booking. Nice try - I absolutely loathe coach travel, and I shan't be taking them up on it. Meanwhile, the East Coast website has sprouted new logos and promises of a new dawn - including scrapping of the reservation fee and improved catering. I'm keen to see what will come of it - I hope it's good. It may just begin to convince those at the top that rail privatisation has been an enormously unsuccessful and wasteful experiment that we should just consign to history.