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2009-01-21 GUA-001
The Guardian


Railway firms ask Hoon for state aid as years of growth hit the buffers

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Association of Train Operating Companies
The Guardian

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The Guardian

Railway firms ask Hoon for state aid as years of growth hit the buffers

21 January 2009
source The Guardian
type Media report

Dan Milmo, transport correspondent

Wednesday 21 January 2009 01.28 GMT First published on Wednesday 21 January 2009 01.28 GMT

Britain's train operators face a "potentially devastating" blow from the economic downturn and need government assistance to stave off disaster, public transport chiefs warned ministers yesterday.

The heads of the five largest train companies Stagecoach, National Express, Go-Ahead, Arriva and FirstGroup urged the transport secretary, Geoff Hoon, to consider shortening trains, rewriting the financial terms of franchise agreements and putting up state funding for an extra 1,000 staff across the rail network.

The unprecedented call for state help came in a meeting with Hoon in which the rail operators warned that rail contracts forged during an economic boom could soon become untenable. Under that scenario, the government would be forced to strip train operators of their contracts and take control of the franchises.

According to a briefing document seen by the Guardian, the industry expects passenger volumes to fall over the next two years, bringing years of growth to a sudden halt. An industry source said some franchises had seen falls in season ticket renewals of up to 10% in January.

"The more pessimistic forecasts will result in significant impacts on all train companies," reads the briefing document.

"At the most pessimistic end of the range, the severity of the downturn would be completely unprecedented and have potentially devastating effects on the finances of some train companies. Given that forecasts seem to be continually worsening, this must be a material risk."

According to the document, the rail executives want the Department for Transport (DfT) to fund 1,000 extra "customer-facing" staff for the railways, in the same month that the industry has announced plans to shed 1,500 people.

The most critical section of the document lays out "contingency plans" for a "very challenging environment", which include: shortening off-peak trains by removing carriages; easing borrowing rules so train operators can offset poor ticket sales; demanding that the government shoulders a larger share of losses on contracts; and requiring that Network Rail cuts some of the costly expansion programmes.

The contingency plans are likely to cause controversy among passenger groups and commuters with their suggestion that trains could become smaller despite years of protests over overcrowding. It also poses a serious challenge to ministers by explicitly asking for a renegotiation of franchise terms taboo at the Department for Transport.

The government is determined the train operators should honour contracts that, in some cases, are worth more than 1bn each to the transport ministry. National Express East Coast, South West Trains and First Great Western have pledged at least 1bn each to the government over the next decade, but the latest industry data indicates that they face a struggle to meet the payments.

Passenger growth slowed sharply last year, according to figures revealed to the Guardian, with commuter numbers increasing by less than 5%, down from 7.8% in 2007. Fare income has risen by just 4% in recent months, far below the double-digit increases that are thought to be vital for some franchises to meet their financial targets.

The DfT has the right to strip a train operator of all its contracts if it defaults on a single franchise. Between them, the so-called "big five" train operators control most of the UK rail network, so under that scenario, the state could effectively renationalise the franchise system.

Railhub Archive ::: 2009-01-21 GUA-001


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