East Coast Main Line to Virgin Trains East Coast

[Ken.W]

Apparently the final set's due to be completed under the refurbishment program next week

[Richard E]

I travelled Peterborough to Edinburgh and return today - 07.00 ex KX well loaded until York, medium to Newcastle and then almost no one onboard to Edinburgh.  The two of us were the only passengers customers in our Mk4!

 

Much the same situation again southbound.

 

Both trains arrived spot on time to the minute.  A great journey both ways, with good catering. 

07:46 ex PBO, York at 08:51. Know it very well, I was in coach B. It's my commute ....

[melmerby]

I see that Stagecoach are moaning that they are still losing money on this route (they own most of the franchise) as revenue growth was not as high as expected.

 

I Thought the DOR East Coast trains actually made a small profit for the public purse before it was re-franchised?

If so why can't Stagecoach who are known for cut throat ruthlessness?

 

Keith

[Chris116]

I see that Stagecoach are moaning that they are still losing money on this route (they own most of the franchise) as revenue growth was not as high as expected.

 

I Thought the DOR East Coast trains actually made a small profit for the public purse before it was re-franchised?

If so why can't Stagecoach who are known for cut throat ruthlessness?

 

Keith

Maybe the problem is that they offered to pay too much for the franchise and so while even if they are making more than DOR East Coast they are paying more than they make to the government!

[Richard E]

Stagecoach have made contingency arrangements for a loss of £84m over the next two years or roughly £5,000 an hour on the route (that's £800,000 a week in round figures). An approach is being made to DFT to renegotiate the franchise according to the news story I've seen. They have also taken a £45m writedown hit on the future value of the franchise in their accounts, company profits are down by 80%. They are describing the franchise commitments as onerous. They expect to return the business to profit in 2019. Their share price fell by nearly 10% by mid-morning today.

 

This roughly equates with £1m a week losses stories I've heard from people in the industry but about which I have not said anything so far.

 

My first thoughts were 'here we go again, when do they hand the keys back' and 'told you they overpaid'.

 

Edit to add that DOR made a loss of just under £1m a week in the last 11 months of their operating the franchise as well according to information available on line.

Edited June 28, 2017 by Richard E

[melmerby]

Stagecoach have made contingency arrangements for a loss of £84m over the next two years or roughly £5,000 an hour on the route (that's £800,000 a week in round figures). An approach is being made to DFT to renegotiate the franchise according to the news story I've seen. They have also taken a £45m writedown hit on the future value of the franchise in their accounts, company profits are down by 80%. They are describing the franchise commitments as onerous. They expect to return the business to profit in 2019. Their share price fell by nearly 10% by mid-morning today.

 

This roughly equates with £1m a week losses stories I've heard from people in the industry but about which I have not said anything so far.

 

My first thoughts were 'here we go again, when do they hand the keys back' and 'told you they overpaid'.

 

Edit to add that DOR made a loss of just under £1m a week in the last 11 months of their operating the franchise as well according to information available on line.

There be even more expenditure when they start paying the lease on those Azumas which must be more than the current fleet.

 

Keith

[brigo]

Edit to add that DOR made a loss of just under £1m a week in the last 11 months of their operating the franchise as well according to information available on line.

 

That doesn't seem to be reflected in their annual accounts. They still made a profit and paid £215.7 million to the DfT as a franchise premium.

 

http://webarchive.nationalarchives.gov.uk/20151215172524/http://www.directlyoperatedrailways.co.uk/PDF/DORReportAccounts2015.pdf

 

Brian

[Richard E]

No, ECML Ltd made a £40m loss in their last year.

 

https://s3-eu-west-1.amazonaws.com/document-api-images-prod/docs/aYNtAhegAe5dlsic0XzS3r1KrTI3nJW8OcemEQTnrK4/application-pdf?AWSAccessKeyId=ASIAIOKFRJ72AR5WELPQ&Expires=1498722561&Signature=LyEtovNmmZTvTXCF4ihdoCWZ2FA%3D&x-amz-security-token=FQoDYXdzEG0aDLTGtU8joH66PJz7riK3A4u4pv%2BMBC%2Bf0v0d7BmOrq%2FwQVoxqCFu2tW3Ici0bTSGjUx54MtXv%2FMAS8VC0O6fZ4ghfcl9hnw%2FTZI6Qczrv2LFNEXDQydcWvT47tl5cWnJRZKOO1nkMrbdL%2Bs643zZi4GgyJB28gGDou2tiB1Uk%2FKHO%2FUlPafupHvTjLgL7dalGoCAE7RaOnsGUVc9DXO0MicWSKUoLxFSY48Jj7P6ndpKHO3luFJMz3mcFpZuvvUJOqOj4rQoFLVbrSb7JWiT5mg5%2FUvkWYITdzLUqjIlPzU4geCl1seUOhFwmfK%2BYUyo7QcO6KqQgF5M9tHCZcNmCw2KEo7Zny74LXhnxvmLx%2FOMsrJdFEnona8xwLPcK5wK5MgQH64JQAjUvGul%2B8wq3t3C8PtQm8%2BJnzvD2jbcGCFP0nhj2rFLZZFG3Ju%2FgSWroGxBW%2BiwbFYUvXzj6XqdEFiXeq6kL59MZffLzJsLqqqqyTsx46Wd0voeC6mL0M7lMTTYH8hSOW2yxNzaBPsBecirbxHdubm9FBeAFLERuL9JKicBluRE7qSjAiZKI5J2453NI%2FBdZtu8nac%2BkOLC2LafdZYhEgko3urRygU%3D

[brigo]

No, ECML Ltd made a £40m loss in their last year.

 

https://s3-eu-west-1.amazonaws.com/document-api-images-prod/docs/aYNtAhegAe5dlsic0XzS3r1KrTI3nJW8OcemEQTnrK4/application-pdf?AWSAccessKeyId=ASIAIOKFRJ72AR5WELPQ&Expires=1498722561&Signature=LyEtovNmmZTvTXCF4ihdoCWZ2FA%3D&x-amz-security-token=FQoDYXdzEG0aDLTGtU8joH66PJz7riK3A4u4pv%2BMBC%2Bf0v0d7BmOrq%2FwQVoxqCFu2tW3Ici0bTSGjUx54MtXv%2FMAS8VC0O6fZ4ghfcl9hnw%2FTZI6Qczrv2LFNEXDQydcWvT47tl5cWnJRZKOO1nkMrbdL%2Bs643zZi4GgyJB28gGDou2tiB1Uk%2FKHO%2FUlPafupHvTjLgL7dalGoCAE7RaOnsGUVc9DXO0MicWSKUoLxFSY48Jj7P6ndpKHO3luFJMz3mcFpZuvvUJOqOj4rQoFLVbrSb7JWiT5mg5%2FUvkWYITdzLUqjIlPzU4geCl1seUOhFwmfK%2BYUyo7QcO6KqQgF5M9tHCZcNmCw2KEo7Zny74LXhnxvmLx%2FOMsrJdFEnona8xwLPcK5wK5MgQH64JQAjUvGul%2B8wq3t3C8PtQm8%2BJnzvD2jbcGCFP0nhj2rFLZZFG3Ju%2FgSWroGxBW%2BiwbFYUvXzj6XqdEFiXeq6kL59MZffLzJsLqqqqyTsx46Wd0voeC6mL0M7lMTTYH8hSOW2yxNzaBPsBecirbxHdubm9FBeAFLERuL9JKicBluRE7qSjAiZKI5J2453NI%2FBdZtu8nac%2BkOLC2LafdZYhEgko3urRygU%3D

 

Well, that link doesn't work

 

The "loss" were payments that Stagecoach/Virgin had to make in their first month of operation in the form of a refundable deposit, asset writedown and franchise premium. The "loss" was not of DOR's making.

 

Brian

Edited June 29, 2017 by brigo

[Richard E]

Apologies for the duff link, it was to the accounts filed at Companies House which show that the £40m loss in the final 11 months splits down as £25.6m for a revenue in advance balance (this appears to be the performance bond that is required) and £6.5m of asset write down. That leaves £13.1m of operating loss in 11 months after paying a dividend of £18.6m to the Treasury. So East Coast was not profitable throughout the entire period of it being government run it would appear.

 

As you might gather I'm now digging into the figures that were glibly quoted by a journo although to be fair I should have added that a lot of that loss was associated with preparatory work for the new franchise. Nevertheless the published profit/loss position after tax WAS a loss of £40.8m for 2015 against a profit of £7m the previous year.

 

It is also clear that the company itself was transferred from being a subsidiary of DOR Ltd to being a subsidiary of Inter City Railways Ltd which is held jointly by Stagecoach Group PLC and Virgin Holding Ltd.

Edited June 29, 2017 by Richard E

[brigo]

Richard,

 

I don't dispute that ECML made a loss in year 2014/2015, but you stated DOR had made the loss, which is not true. DOR ran East Coast for 11 months and returned a profit of £11 million and paid £215.7 million to the DfT (DOR's owner). My link above to DOR's accounts. ECML's loss is down to what their new owner had to pay out in the first month of operation or it may be 2 months as Stagecoach's financial year ends 30 April rather than 31 March of DOR.

 

Brian

[The Stationmaster]

The interesting thing in all this is that yet again Virgin have got their growth forecasts wrong - just as they did on the original WCML franchise and just as they did when they 'injected commercial acumen' into Eurostar.  Unfortunately however this time it is Stagecoach which is carrying most of the financial impact.

[Chris116]

The sad fact is that the way the franchaises are let, the winner will always be the company who are closest to bankrupting themselves. The ECML seems to be the worst affected by this system at the moment but it could happen anywhere in the country.

[melmerby]

The interesting thing in all this is that yet again Virgin have got their growth forecasts wrong - just as they did on the original WCML franchise and just as they did when they 'injected commercial acumen' into Eurostar.  Unfortunately however this time it is Stagecoach which is carrying most of the financial impact.

It's not a lot of Virgin as they only have a (token?) 10% stake in it, presumably so that the brand can be used.

Stagecoach own the remaining 90% and they AFAIK do the day to day running of the franchise. Just how much input does Virgin/the beardy one actually have?

BTW The East Coast trains unit cost 11m to buy from DOR.

 

Keith

[Richard E]

Brian

 

Quite, I stupidly followed what a journo wrote without checking it ....

[The Stationmaster]

It's not a lot of Virgin as they only have a (token?) 10% stake in it, presumably so that the brand can be used.

Stagecoach own the remaining 90% and they AFAIK do the day to day running of the franchise. Just how much input does Virgin/the beardy one actually have?

BTW The East Coast trains unit cost 11m to buy from DOR.

 

Keith

 

If it was done according to their past form Virgin would have had a lot of input on the 'promises' of revenue achievement as that is supposed to be what they're good at and is the way they had done things elsewhere - even on joint ventures.  Mind you with so much of the risk in Stagecoach's lap they must have agreed the numbers before the bid went in.

[melmerby]

If it was done according to their past form Virgin would have had a lot of input on the 'promises' of revenue achievement as that is supposed to be what they're good at and is the way they had done things elsewhere - even on joint ventures.  Mind you with so much of the risk in Stagecoach's lap they must have agreed the numbers before the bid went in.

I'm actually surprised that Stagecoach got suckered into this one.

They are usually very canny about making money and generally dont take on anything which seems too much of a risk.

Virgin Group seems to have pulled the wool over their eyes with this franchise.

 

Virgin used to be one of those "trusted" names where revenue was guaranteed if their name was on the label.

Personally I think the gloss has faded somewhat and the public treat Richard Branson's announcements with more scepticism these days, especially being that he is viewed as a tax exile living in Neckerland counting his Royalties.

 

Keith

[cravensdmufan]

I wouldn't think Virgin are too worried financially, with just a 10% stake in the venture.

 

But as far as their public image is concerned, it could be a different matter.

 

They love to have their branding splashed all over the place on a lot of things these days - so it could be embarrasing if "Virgin Trains East Coast" suddenly goes down the pan.  After all the tumpet blowing and photo calls and razzmatazz when it was launched!  And they led the public to believe they were the ones to thank for introducing new IEP trains!

 

When all is said and done, passengers think the whole East Coast service is Virgin - full stop!

[melmerby]

When all is said and done, passengers think the whole East Coast service is Virgin - full stop!

Because that's what it's called.

 

But as I said in my previous post, I think the shine has worn off Virgin group somewhat in recent times and isn't the instant business pull it used to be.

At one time Richard Branson's publicity outings were top news, now they barely get a mention.

 

Keith

[lmsforever]

​In yesterdays Daily Mail a young chap said that he saved £40  on Newcastle London by flying Newcastle Spain London the paper loved this but he did try to buy a walk on fare so what did he expect.What a waste of time taking two days to do a two hour journey still he is a student so has time on his hands.

[Chris116]

​In yesterdays Daily Mail a young chap said that he saved £40  on Newcastle London by flying Newcastle Spain London the paper loved this but he did try to buy a walk on fare so what did he expect.What a waste of time taking two days to do a two hour journey still he is a student so has time on his hands.

As always in these sort of reports they forget that he flew into Gatwick Airport which means more costs to get to London! Also how much does it cost to get from the centre of Newcastle to the airport? I think the saving may have been nearer to £15 to £20 and given that a little forward planning would have saved a lot more with an advance ticket.

[Zomboid]

What's the walk up fare for flying? More than £40 I'd guess.

[Coryton]

As always in these sort of reports they forget that he flew into Gatwick Airport which means more costs to get to London! Also how much does it cost to get from the centre of Newcastle to the airport? I think the saving may have been nearer to £15 to £20 and given that a little forward planning would have saved a lot more with an advance ticket.

 

There's also the risk of getting stranded in Spain if the second flight is cancelled. If you get the train to London and end up stuck in Spain then something has gone very very wrong.

[melmerby]

 given that a little forward planning would have saved a lot more with an advance ticket.

C'mon. He was a student. Forward planning isn't part of the psyche.

 

Keith

[black and decker boy]

Part of the problem to VTEC and the reason they are in talks with DfT is that a lot of the promised inffastructure upgrades to allow extra trains or faster services or extra reliability have been shelved to save money.

 

There is talk elsewhere that the extra VTEC service cannot now happen as the infrastructure work isn't happening to create capacity. Also, power supply upgrades north of Newcastle needed to support IEP /Azuma are in doubt and so extended HST use is being looked at.

 

That said, Stagecoach have been open that they got their assumptions wrong as well. All long distance operators are apparently seeing slot lower growth than had been the norm. Whether that's terrorism, better Motorway journey times (M1 in north midlands now complete), or lack of disposable income isn't clear.