Virgin Trains lose Holyhead service

Marcusm

Fratton Fred wrote: »

I've mixed views on this.

First have made massive improvements to the GW service since they took over and anyone who has done the overnight sailrail from fishguard will appreciate the Bacon rolls on the swansea to London train.

However, I like virgin. I always feel their trains have more room for some reason.

It will still have the same trains, absent a cascade and I don't think one is planned. There may be some disruption as I think completely new seating is planned as part of the franchise bid.

devnull

Marcusm wrote: »

Really, is that why the Competition Commission inquiry did nt result in any substantial fines, changes or support for such views?

I never said there was an issue with competition, simply that the leasing companies are on a much higher profit margin than the train operators which is a simple fact.

For instance, looking at Angel Trains latest annual report
Revenue: £341.7m
Spending: £167M
Gross Profit: £174.7M
Profit Margin: over 50%

So you're looking at a profit margin of around 50% They made more profit than they spent. That is astounding. To put it in better context, for every £1 the train companies spend on leasing from Angel Trains, 50p of it is profit. That is a huge margin and this easily shows you where the problem is regarding the system when companies are making such huge profit margins.

Now take a look at First's Rail Division in 2010 as the biggest train operator in the UK by far at present.

Revenue: £2.188bn
Profit: £92.7m
Profit Margin: 4.2%

This is why I, and many others have problems with the leasing companies they are taking out far more money than the train operators at a far higher rate, the leasing companies are owned by banks and private investment companies and are changing hands for many billions of pounds, it's no wonder the leasing companies are being sold for billions as the amount of money they are making is astonishing, and now there is a shortage of stock in the UK, they are using this to their advantage to make even bigger profits, which is why the problems with lack of rolling stock due to government policy and dithering and the leasing companies profits are all part of the very same problem.

A Dub in Glasgo

devnull wrote: »

However what you need to factor in is the larger train operating companies on the bigger franchises do not get subsidy they pay a premium, for example First will return €5.5bn to the taxpayer in exchanges for the right to run the West Coast Line until 2026. The money the government is earning from the premiums is then used to fund subsidy for other operations. So the true calculation of how much government subsidy is in the network right now is the premiums the government are raking in minus the subsidy they are laying out, that gives you the net cost to the government of financing the railway operations, if you took out the premiums, you'd be left with an even bigger subsidy.

Well then hopefully the franchise will not have the ludicrous situation of First handing back the GW one just as they were about to pay the taxpayer the premiums!

It was once reported that Virgin Trains earned more money in cross payments from Railtrack and then Network Rail than they did running the train service. This was during the WCML upgrade. Virgin trains creamed it in during that upgrade.

There is a whole industry within the rail industry in Britain dedicated to delay attribution!

The Idyll Race

Fratton Fred wrote: »

have you got actual experience if British rail transport before and after privatisation?

Trust me, it is a million times better than it was 30 years ago.

I certainly do. I've been travelling over and back for the last thirty years, lived in London between 1988 and 1992 and 2004-2005 and in the West 2010-2012.

Screwing pax for the last ounce with fare gouging is my issue, and the stupidly complex nature of the whole thing is part of that.

A Dub in Glasgo

devnull wrote: »

I never said there was an issue with competition, simply that the leasing companies are on a much higher profit margin than the train operators which is a simple fact.

For instance, looking at Angel Trains latest annual report
Revenue: £341.7m
Spending: £167
Gross Profit: £174.7M
Profit Margin: over 50%

So you're looking at a profit margin of around 50% They made more profit than they spent. That is astounding. To put it in better context, for every £1 the train companies spend on leasing from Angel Trains, 50p of it is profit. That is a huge margin and this easily shows you where the problem is regarding the system when companies are making such huge profit margins.

Now take a look at First's Rail Division in 2010 as the biggest train operator in the UK by far at present.

Revenue: £2.188bn
Profit: £92.7m
Profit Margin: 4.2%

This is why I, and many others have problems with the leasing companies.

The ROSCOs cream it really big in the way the rail network was privatised. The UK Government sold off the huge BR rolling stock assets for peanuts and allows a system to develop where a lot of taxpayer funding to the railways is now spent on rolling stock that the taxpayer once owned. Absolute madness.

devnull

A Dub in Glasgo wrote: »

Well then hopefully the franchise will not have the ludicrous situation of First handing back the GW one just as they were about to pay the taxpayer the premiums!!

FGW did not hand back the franchise, despite what you hear in the press it's simply not the case and is yet more union propaganda which is being banded out by Bob Crow who feels by misleading the public it will further his demands to return the system to public ownership, it does work but it does also mask the truth somewhat to the general public.

When the First Great Western franchise was agreed in 2005/2006, the last three years of the contract were optional and if either party did not want to go ahead with them, they would be able to walk away without any penalty. This is not walking away from the contract, it is simply exercising a clause which was agreed at the time of signing the contract.

When the contract was signed in 2005/6, the department for transport agreed to procure a new set of trains which would enter service during the last three years of the franchise and asked bidders to ensure their bid took this into consideration. The Intercity Express Program is now several years behind schedule, and despite the fact the tender was going out in 2007/2008 the deal for the trains was only completed last week and they will not be in service until 2017 at the earliest. The Government has also gone back on promises for extra diesel trains it promised in 2008.

FGW have been paying premiums every year since they took the franchise, the premiums were set to rise in the last few years due to the benefits of the new rolling stock which should have been in place, however the Department for Transport did not deliver on the promises they made to First in 2005 when the contract was awarded, so First decided to exercise the clause they had in their contract to not take up the three extra years as the sums were based on promises and conditions that were not met.

It's a totally different case to where National Express East Coast walked away because they simply could not afford to fund a bid because of their own financial problems and bidding even more than GNER who went bust on the same line previously, as on the East Coast line all government promises and contractual obligations were met and they did not agree an optional break in their contract with the department for transport.

A Dub in Glasgo

It is handing back the franchise by exercising that clause - just as the taxpayer was expecting an increase in premium payments. Here is hoping that the WC franchise does not contain such ridiculous clauses.

I did not compare it to the EC franchise where 2 previous holders handed back by breaking their contract. There were concerns at the time that those franchisees bid too much for the franchise, just as there are concerns that First has bid too much

devnull

A Dub in Glasgo wrote: »

It is handing back the franchise by exercising that clause - just as the taxpayer was expecting an increase in premium payments.

At the end of the day it all comes back to the Department for Transport however, as they were the ones who broke the agreement that was made at the time of awarding of the franchise in relation to the provision of extra rolling stock which is now years behind the date which was originally agreed. The FGW business case envisaged a modern fleet of trains generating enough revenue to cover the rapid escalation in fees from 2013 to 2016 because this is what was mentioned in the franchise specification and agreed between the government and the operator.

The fact is even if the clause did not exist FGW would almost certainly have valid grounds to either terminate the contract or ask for new terms, based on the fact that that the Government broke contractual promises that were made at the time of the signing of the franchise which could have rendered the contract null and void anyway. At the end of the day if the Department of Transport and delivered what they said they would, as per the agreed timescales, none of this would be happening.

SandyfordGuy

So basically, to sum up the obvious, all that proves is what has been said before, that it all comes back to rolling stock at the end of the day, whether that is not enough of it, delays to new rolling stock, or banks extorting money out of the system by making huge profits on the leasing of rolling stock.

Really there needs to be an overhaul of the whole thing, as with leasing companies charging operators twice the cost price to lease rolling stock, and rolling stock tenders taking several years at least to be processed and constant indecision, it doesn't say a whole lot of good about the way this element of the system was privatized.

Clearly what needs to happen is for all new orders to bypass the leasing companies and instead if financing companies need to be used, is for the payments for the stock to be spread over several years and use the finane providers that way, rather than paying hundreds of million to leasing companies for years who still own the stock at the end of it, having raked in far more than the actual stock cost.

Also they clearly need to speed up tenders and train orders, announcing a prefered bidder in 2009 for a order and then not placing the order until over 1,000 days later is ridicolous.

dowlingm

If the Irish Mark 3s were owned by a ROSCO there is a good chance they might be getting refurbed rather than the scrapper's torch, like their UK cousins. At least the decisions would be purely on asset value and not on half hearted tendering "shure there was no interest" etc.

icdg

I think this makes South West Trains the only original franchisee still left (if one discounts Chiltren, but they have changed hands no less than twice). That shows you the very transitional nature of any GB rail undertaking - they are mere short-term custodians of a route rather than a long term owner which makes long-term decisions very difficult to make. In fact its now the Department for Transport which is really running the railway - with civil servants more involved in making hands on decisions than they ever would have been during the BR era.

People keep bringing up Translink as some kind of model for ownership, but the fact is that on paper at least, Translink's structure is nearly identical to CIE, with a holding company and three operating subsidiaries (a railway company, a city bus company, and a rural bus company, just like CIE). Where Translink differs from CIE is that in 1995 they began slowly integrating the services. Translink was initially just a brand, but they began by appointing the same directors to the companies and then appointing managers to the same position across the three companies. As a measure of integration its been massively successful and didn't require new legislation - the Northern Ireland Transport Holding Company, Northern Ireland Railways Company Limited, Citybus Limited, and Ulsterbus Limited are still legally separate entities. But if Translink could do it, CIE could do the same. All it would require is a policy change. It would be very slow, it has taken Translink fifteen years to get where it is today.

Marcusm

devnull wrote: »

I never said there was an issue with competition, simply that the leasing companies are on a much higher profit margin than the train operators which is a simple fact.

For instance, looking at Angel Trains latest annual report
Revenue: £341.7m
Spending: £167M
Gross Profit: £174.7M
Profit Margin: over 50%

So you're looking at a profit margin of around 50% They made more profit than they spent. That is astounding. To put it in better context, for every £1 the train companies spend on leasing from Angel Trains, 50p of it is profit. That is a huge margin and this easily shows you where the problem is regarding the system when companies are making such huge profit margins.

Now take a look at First's Rail Division in 2010 as the biggest train operator in the UK by far at present.

Revenue: £2.188bn
Profit: £92.7m
Profit Margin: 4.2%

This is why I, and many others have problems with the leasing companies they are taking out far more money than the train operators at a far higher rate, the leasing companies are owned by banks and private investment companies and are changing hands for many billions of pounds, it's no wonder the leasing companies are being sold for billions as the amount of money they are making is astonishing, and now there is a shortage of stock in the UK, they are using this to their advantage to make even bigger profits, which is why the problems with lack of rolling stock due to government policy and dithering and the leasing companies profits are all part of the very same problem.

One of the principle focusses of the CC inquiry was on pricing as this was what the DfT had complained about - despite having been engaged in discussions with the Roscos about repricing and what could be done to reduce costs.

The numbers you have quoted do not provide an accurate reflection of the profit margins inherent in the rail car leasing model. This is because many of the "costs" are front ended for accounting purposes and more dramatically so since the transition from UK accounting standards to international accounting standards (IAS) around 2005. Broadly, the historice UK accounting spread the depreciation (the write off of the cost of the rolling stock) in such a manner as to show a constant profit margin over the life of the vehicles (or at least their expected life). However, IAS front loads this (and has the effect of changing it for past years) meaning that there are large losses when fleets are accepted and followed by proportionately larger profits later - the overall profit, however, will never even be 5% pa on the money invested in the rolling stock. The large profits showing up now are a reflection of the fact that many large fleets were procured and put into service more than 10 years ago - including the Virgin Pendolinos.

One of the "price gougings" often cited were trains used on the Isle of Wight. These were ex Northen Line vehicles (only things which could fit under certain low bridges). Lots of press comment that there were huge leasing fees being charged for 1930s trains. Of course the truth was that the only money being collected was not a rental charge but a contribution to the cost of decommissioning including removing asbestos!!

In my experience, Rosco management actively targeted increasing their fleet sizes (especially during the periods they were owned by large banks) at the expense of profitability and for certain large projects bid at levels that were certainly not making super normal profits.