Southwest Trains in the sidings by Phil Marsh

Stagecoach Group and Department for Transport break off Franchise extension negotiations

Published: 13th July 2015

Island Line in danger as a result?

The busiest UK commuter franchise, the Stagecoach owned South West Trains (SWT) operation serving Waterloo operated by Stagecoach since privatisation will not be extended. Negotiations for an extension have been underway for some time have ended and so a new Franchise will be let by the Department for Transport. (DfT).

The announcement

Stagecoach Group plc has confirmed that it has been notified by the DfT that it is ending the discussions with Stagecoach subsidiary, Stagecoach South Western Trains Limited ("South West Trains"), regarding the direct award of a new rail franchise.

The current franchise is due to end in February 2017 and SWT had made proposals to the DfT concerning the proposed franchise extension. Which would have ended no earlier than April 2019. The DfT has told Stagecoach that it plans to issue a new franchise tender for a new long-term franchise to start at an unspecified date in 2017.

The DfT has indicated it expects to exercise its option to extend the existing South West Trains franchise beyond February 2017 to allow for the new franchise to be arranged, possibly to August 2017. Stagecoach has said to investors that it does not expect SWT to earn a significant profit during any extension period.

They said:

Stagecoach said that its direct award proposals “sought to build on the extensive improvements delivered under our operation of the franchise since 1996, providing more benefits for customers, good value for taxpayers and an appropriate return for investors.”

Despite extensive negotiations since 2013 between the DfT and Stagecoach, what they call ‘a significant difference’ has remained between both parties regarding the financial evaluation of the proposals. As a result, South West Trains has been unable to reach an agreement on a direct award.

Despite this, Stagecoach will be able to draw on 20 years of running this franchise and intend to submit a ‘powerful and attractive bid’ for a new South West Trains franchise. To help this, the company says it will continue to deliver their commitments to government and customers, including the £50m package of investment agreed with the DfT earlier this year as part of a Deed of Amendment to the existing franchise.

Alliance well and truly broken?

It seems highly likely that this negotiation breakdown could be behind the SWT and Network Rail ‘Wessex Alliance’ ending two years early as reported at http://www.rail.co.uk/rail-news/2015/wessex-alliance-ends/

This may have been because as Network Rail will be involved in franchise negotiations with bidders and the DfT, it would have put them in a difficult place.

Stagecoach strength

Stagecoach is a major player in the UK rail market with interests in the East Coast, West Coast and Midland Main Line franchises. They are also shortlisted for the next Transpennine Express and East Anglia franchises.

South West Trains operates around 1,600 trains a day on a network in the south and south-west of England, serving more than 200 stations. The South West Trains network includes routes through Hampshire, Surrey, Dorset, Wiltshire, Berkshire, Devon, Somerset, and Greater London, serving a mixture of commuters and longer-distance travellers.

Stagecoach strength

Stagecoach is a major player in the UK rail market with interests in the East Coast, West Coast and Midland Main Line franchises. They are also shortlisted for the next Transpennine Express and East Anglia franchises.

South West Trains operates around 1,600 trains a day on a network in the south and south-west of England, serving more than 200 stations. The South West Trains network includes routes through Hampshire, Surrey, Dorset, Wiltshire, Berkshire, Devon, Somerset, and Greater London, serving a mixture of commuters and longer-distance travellers.

Threat to Island Line?

The Isle of Wight Railway is a stand-alone quirky 8 ½ mile route running between Ryde Pier Head and Shanklin and loses a reported £3 million a year. The infrastructure has not beeen seriously upgraded since early 1967 when the line was electrified. The trains used today were built in 1938 and were used on London Underground before being transferred to Island Line mand they are the oldest trains in regular daily UK franchised service.

It is known that there was a large scale meeting held in February to discuss the future of the line with the DfT, Network Rail and local politicians present. Options on the table ranged from total closure to inviting the Isle of Wight Steam Railway to run the line - who do not!. (See http://www.rail.co.uk/rail-news/2015/steaming-to-ryde/ for details).

Politics, hot air and steam

The Leader of the IOW Council has gone public saying that running Island Line as a social enterprise company could result in a worse service and that the way forward would be to form a community owned company.

Jonathan Bacon, IOW Council leader said that it was unlikely that the service would continue as now after the franchise ends. Local MP Andrew Turner wants steam trains to run to Ryde but seems to have been badly briefed on the reality of douing this and has been found wanting when it comes to accurate information for his plan. He has since spoken to Rail Minister Claire Perry about forming a task-force to look at the future of rail on the IOW.

The IOW council is currently working on a business case for the future of the Island’s rail operation and they hope to publish their report by the end of the year. This has now been made more urgent given the fact that the franchise will end in 2017 rather than in 2019.

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