INTER-CITY EAST COAST

A TRAGI-COMEDY IN SIX ACTS

A sorry saga of multiple lessons not learned

Roger Ford

Route of the ‘Flying Scotsman’: led by power car No 43038 City of Dundee, GNER’s 10.30 ‘Northern Lights’ service from King’s Cross to Aberdeen passes Moss Crossing, north of Doncaster, on 2 June 2006. Brian Morrison

This month I have taken the unusual step of devoting almost all of ‘Informed Sources’ to a single subject – the history of inter-city franchising on the East Coast main line (ECML).

While I occasionally come under fire for being backwards looking, as I relived the past 22 years it became increasingly clear that the repeated failures say as much about franchising in general as they do about Inter-city East Coast (ICEC). Wider issues also reoccur, not least the history of frustrated infrastructure upgrades.

With the future of franchising and the whole structure of the railway yet again the subject of debate, I hope readers will find this one-off informative as Transport Secretary Chris Grayling’s vague aspirations for a ‘regional partnership’ start to coalesce.

ACT 1: GNER – BLYTHE SPIRIT

When Sea Containers won the ICEC franchise in March 1996, subsidy was forecast to fall over the seven years from just under £100 million at today’s prices to zero. The business plan assumed that the inherited turnover of £325 million would increase by 35% to £440 million. This was based on raising load factors by 11% on top of squeezing two extra diagrams out of the IC225 fleet.

My contemporary analysis suggested these numbers were feasible. As Table 1 (overleaf) shows, ridership did indeed grow initially, until the aftermath of the Hatfield derailment sent ridership into a decline.

Illustrating the effect of the change in track access charges (see box, left), in 2001-02 GNER would pay a premium of £45 million.

ACT 2: SRA – MAD DOGS AND ENGLISHMEN

In September 1999, Sir Alastair Morton threw franchising up into the air. Sir Alastair was a visionary who thought big. He had just been appointed Chairman of the Shadow Strategic Rail Authority (SSRA), which was taking over responsibility for franchising.

To Sir Alastair, the only way to get private investment in the railway was through longer-term franchises – between 10 and 20 years. In pursuit of this aim he invited existing and would-be franchisees to come forward with offers to replace any existing franchise with a new one offering value to the Government.

USURPERS INVITED

In November SSRA confirmed that ICEC, together with Chiltern and South Central, were the first of the franchises to be opened to usurpers.

Just before Christmas that year it was revealed that incumbent Sea Containers and Virgin Rail Group, in association with Stagecoach, had prequalified to bid for ICEC.

HEALTH WARNING

In this analysis, unless otherwise stated, all premium payments and other financial details have been brought to 2018 values using the Treasury’s GDP Deflator. This is intended to put premium payments on an approximately equal footing.

But please note that from the start of Control Period 2 (CP2) on 1 April 2001, the Government changed the structure of subsidy.

Instead of all the subsidy being paid to the train operating companies (TOCs), with Railtrack funded through train operators’ track access charges (TAC) alone, some of Railtrack’s income would be paid as a direct grant.

Reducing track access charges meant the TOCs required smaller subsidy or could pay a high premium. Subsequent Control Periods have seen TACs rise and fall. They can also change within a Control Period, often rising in the final year.

WHAT THEY SAID THEN

The only way we’ll get down to zero subsidy in the seventh year is not by cutting services, it’s by increasing services and getting more people to travel.

You can’t get there by cost reductions, it’s about bums on seats.’

Christopher Garnett, Chief Executive, GNER, March 1996

’Highland Chieftain’: the 07.55 GNER HST from Inverness to London King’s Cross passes Blackford Crossing, between Perth and Stirling, at speed on 10 April 2007. Brian Morrison

Typifying the optimism of those times, 60 days were allowed to prepare detailed proposals. The winning offer was expected to be chosen ‘in the spring’ with take over in the second half of 2000. With Richard Branson seeking to usurp James Sherwood on his ‘Route of the Flying Scotsman’, the battle of the egos was on. First to reveal its hand was GNER.

A two-stage upgrade in speed and frequency would see Advanced Tilting Trains (ATT) providing 15 services a day between London and Edinburgh by 2004. The initial headline journey time of 3hr 40min would fall to 3hr 30min when the update was completed, including 140mph running on much of the route, by 2009-10. Sea Containers would fund upgrades to parallel routes for diverted freight trains to the tune of £285 million.

Virgin’s counter proposal made 140mph ATT seem mundane.

At its heart was 105 miles of new high-speed line paralleling the ECML from Conington South, past Doncaster to rejoin the main line at Hambleton South Junction. A further 14-mile cut-off would avoid the curves at Morpeth and Widdington. Exploiting this new alignment, 205mph Virgin à Grande Vitesse (VGV) trains would give a headline London to Edinburgh journey time of 3hr 15min. The full service would start in 2009.

LONG-TERM VIEW

‘Value would be derived from longer terms and modified subsidy to premium profiles, in return for commitments to high levels of investment and service. We will not discourage bids for other TOCs, this is an open market situation.’ Sir Alastair Morton, Chairman, SSRA, September 1999

HARD CHOICE

For all Sir Alastair’s dynamism, SSRA could not decide between these offers. GNER had built up a reputation for excellent customer service but had not bought any of the trains promised in the franchise. Virgin had seen customer service deteriorate rapidly but was buying new trains.

Then, on Valentine’s Day 2001, the now Strategic Rail Authority (SRA) announced it had put the competition on hold. Railtrack had just reported that the cost of the associated ECML upgrades had increased by between 20% and 100%, depending on what contingencies were included.

Sir Alastair blew his top.

‘If Railtrack is going to apply an air pump to the estimates on every project then how the hell do we plan a capital investment programme? To say that you need a strategic plan before they can do a detailed design of 90% of the East Coast project is self-confessed bullshit’.

Railtrack riposted that only Phase 1 of the ECML upgrade, the £60 million Leeds First project, was firmly committed. ‘There cannot be a definitive plan for the ECML Route Modernisation until the SRA has produced its strategic plan for the route’, Railtrack sniffed.

EMPTY PURSE

In April 2001 Sir Alastair tried to solve the impasse with his financial tool of choice – a Special Purpose Vehicle (SPV). The SPV would bring together a project management company, the new ICEC franchisee, Railtrack and external investors to take the upgrades forward. An existing Railtrack/Fluor Daniel/ Mott MacDonald ECML Project team had already spent £70 million on development work: another £70 million would be needed to take the upgrade forward.

But the recent Periodic Review had awarded Railtrack more money for Control Period 2 than the Treasury had budgeted for. As a result, Transport Secretary Stephen Byers told the SRA to drop the grandiose schemes and simply seek new benefits for passengers instead by negotiating a two-year extension to the existing GNER franchise.

This would run to April 2005.

Mr Byers ‘regretted’ that the attempt to negotiate a new 20-year franchise had failed. However, ‘since Hatfield (the October 2000 derailment) it has become clear that a lot more work has still to be done to develop this major infrastructure upgrade’.

We know now that behind the scenes ministers and officials were talking of insolvency and that Stephen Byers considered Railtrack a ‘basket case’.

A laconic Chris Garnett summed up the general disappointment. ‘Two years is better than nothing’.

ACT 3: WAYS AND MEANS On 16 January 2002, GNER was awarded the two-year extension to its existing franchise. There would be no subsidy during the extension and GNER committed to spend £115 million over the remaining three-year term.

Commercially GNER was still suffering from the after-effects of Hatfield. Temporary speed restrictions caused by gauge corner cracking were adding 13.5 minutes to King’s Cross to Edinburgh journey times. This was reflected in what James Sherwood called ‘mediocre earnings’ for the first quarter of 2002. At £8 million, they were ‘sustained largely through penalties paid by Railtrack and insurance claims’. A year later the SRA updated its Strategic Plan. The ECML upgrade, set at £3.9 billion the year before, had been ‘de-scoped’ and was now costed at £1.1 billion.

Enhancements would now be taken forward as individual schemes integrated with renewals.

An SRA review had shown that many benefits could be achieved through a much-reduced scope of infrastructure work. SRA Chairman Richard Bowker assured me that around 80% of the benefits could be achieved at 20% of the original cost.

TABLE 2: ECML UPGRADE PROPOSALS – 2001

PHASE 2 – COMPLETION 2006 Peterborough station remodelling New platforms at King’s Cross Dedicated freight bypasses:

■ Peterborough-Doncaster (via Lincoln)

■ Doncaster-York, Northallerton, Leamside (Ferryhill-Pelaw line reopening)

■ Additional capacity Newcastle-Edinburgh

PHASE 3 COMPLETION 2008

Hitchin flyover

Newark flyover

Doncaster remodelling and flyover Traction power supply and junction upgrades PHASE 4 (PROVISIONAL) Welwyn Viaduct quadrupling Hitchin-Peterborough quadrupling Additional power supply upgrade

Heroic ambition: Class 91 No 91024 Reverend W Awdry departs from Leeds on 14 August 2006, propelling the 14.05 GNER service to King’s Cross. Brian Morrison

FIGURE 1: GNER REPLACEMENT FRANCHISE PREMIUM PROFILE

TIME PRESSES

At the end of 2003, with the SRA still developing the ECML Route Utilisation Strategy, Christopher Garnett warned it was getting ‘very tight’ to bid for the replacement ICEC franchise to take over in 2005.

Mr Garnett believed the market would support half-hourly trains to Leeds and Newcastle, with one train per hour continuing to Edinburgh. This depended on the new chord at Allington, which had just gone out to tender, plus new platforms at Finsbury Park and King’s Cross (now platform 0).

A decision on IC125 replacement was also pressing. Mr Garnett feared that when procurement for the replacement franchise started bidders would offer the ‘cheap and nasty Voyager’ unless SRA specified something better.

TRY AGAIN

He did not have to wait long, with SRA issuing the Official Journal of the European Union (OJEU) notice for the replacement franchise on 29 January 2004. The franchise was for seven years, with a further three subject to performance criteria being met.

When the pre-qualifiers were announced in May there were some international surprises. In addition to GNER, the challengers included FirstGroup, Danish State Railways and a consortium of Stagecoach, Virgin and Deutsche Bahn. It was hoped to select the winning bid by the ‘winter’.

In the event, the deal was not signed until late on 18 March 2005 – for a franchise starting on 1 May. That it was a near run thing was confirmed by the fact that the agreement went straight to contract, bypassing the usual preferred bidder stage.

HEROIC

GNER had won with an heroic bid based on a compound annual revenue growth rate (CAGR) of 8.7%. It needed the threat of the Freedom of Information Act to extract the premium payments from an embarrassed Department for Transport. When they came it was immediately clear GNER had put in a ‘red-mist’ bid to retain the franchise.

Brief encounter: power car No 43306 leads the 08.40 National Express East Coast service from Leeds to King’s Cross through Harringay on 21 July 2008, as unit No 313038 calls with First Capital Connect’s 10.23 Welwyn Garden City to Moorgate service. Brian Morrison

Informed sources suggested Virgin/ Stagecoach had been the runner up, about £390 million behind on net present value (NPV), with DSB and EWS a close third. FirstGroup could have been as much as £780 million behind. When I challenged Christopher Garnett on this disparity, he was as insouciant as ever. ‘It was just projecting forward what we have been doing. It’s all about raising standards and then more people will travel. I’m amazed how low all the others bid’. SRA officials claimed the GNER bid was ‘as expected’.

GNER was focusing on its London to Leeds market, which had grown by 30% in the previous two years and was now claimed as the ‘biggest long-distance rail market in the UK’.

Franchise spending commitments totalled £165 million, including £98 million on the IC125 fleet, which would be increased by a further three sets. GNER would also work with Network Rail on a £90 million electrification scheme between Leeds and Hambleton Junction to create the ‘electric horseshoe’.

So with ridership and revenue growing and ECML performance recovering from Hatfield, GNER began the replacement franchise on a wave of irrational exuberance. Table 3 and Figure 1 (previous page) show the challenge it was taking on.

As a brief diversion, Figure 1 is a reminder that, to borrow an American football term, Sea Containers invented the ‘Hail Mary’ franchise bid, based on a straight line 8% annual premium growth rate, with cap and collar after four years. Ideally there is a break point at year seven, when you can terminate the contract before the premium really cuts in.

OPTIMISM

There was reason for GNER’s optimism. In the first quarter of 2005 profit was up by 29% year-on-year. And while the terms of the new franchise starting on 1 May 2005 would cut profitability by a third initially, revenue growth was expected to allow profits to rise ‘to old-franchise levels and better’.

But three months later, while reporting revenue up year-on-year, James Sherwood warned that the London 7/7 bombings were expected to have an impact in the coming quarter. And the bombings were not the only threat to GNER’s finances.

Under the new franchise GNER was contracted to provide six extra trains in each direction between London and Leeds from 2007 – or earlier if possible. But open access operators Hull Trains and Grand Central were also seeking new track access agreements. Hull Trains already had temporary approval for an extra out and return working, bringing its total to six.

Grand Central was seeking four departures each from Bradford Interchange and Sunderland.

THREAT

In January 2006 the Office of Rail Regulation (ORR) said it was ‘minded to approve’ access rights for three Grand Central Sunderland services a day. Hull Trains’ temporary rights would be extended to 2010.

This was a clear threat to the GNER business plan. DfT Rail told me it was ‘very concerned’ by the decision. If GNER did not get the additional London to Leeds paths, premium payments would be reduced.

When ORR confirmed the Grand Central paths, I put in an FOI request seeking details of what the ICEC Invitation to Tender (ITT) said about open access. Bidders had been told to assume existing service specifications of franchised operators and Hull Trains would remain at current levels.

A subsequent written answer added that while GNER had a commitment to progress plans for the half-hourly Leeds services, these were not part of the premium payments.

CRISIS

This did not deter GNER from seeking a judicial review of ORR’s decision, which was rejected in the High Court on 27 July 2006. A fortnight later Sea Containers revealed that after just 14 months of the new franchise GNER was experiencing a cost and revenue crisis.

Passenger revenue was £40.6 million below budget with half attributed to the after-effects of the 7/7 bombings. Projected revenue growth for the previous 14 months had been 9.9% – note 14 months not an accounting year. Actual growth had been just 3.3%. Costs were also increasing.

Traction electricity (EC4T) prices were up by 26%. A further 65% increase forecast for 2007-08 would bring the total increase in EC4T costs to £13.5 million.

In addition, Network Rail’s ‘better than anticipated’ performance was also hitting the bottom line. GNER was now making net Schedule 4 and Schedule 8 payments to Network Rail which were expected to continue at this higher level.

END GAME

At the time of the August announcement Sea Containers said it had begun discussions with DfT Rail on the impact of these ‘adverse factors’. A DfT spokesman I contacted was quite clear: our stance is that we never renegotiate contracts.

By October 2006 it was all getting very fraught. GNER asked the Transport Secretary to make an Interavailability Direction removing the open access operators from the ORCATS revenue allocation system for flows between London/ Stevenage and York, Northallerton, Grantham, Retford and Doncaster. In other words, the open access operators would not take a share of GNER revenue on these service pairs.

East Coast interlude: Nos 91103, 43311 and 91116 stand at King’s Cross on 6 January 2015. John Whitehouse

Meanwhile, Sea Containers had filed for protection under Chapter 11 of the US Bankruptcy Code due to an inability to repay debt. The message from Sea Containers was that the parent’s financial difficulties ‘don’t really have an impact at all on GNER’.

Confirmation that the end was approaching came in November when President and CEO Bob MacKenzie told The Sunday Times that Sea Containers would withdraw from the GNER franchise if terms were not renegotiated by the end of April 2007. 1 May was a key date because it would see the performance bond, forfeited in the event of default, almost double.

A further reason for hanging on was GNER’s force majeure claim to cover the impact of 7/7. Worth just over half of the £40.3 million revenue shortfall, it would offset the value of the existing performance bond.

ACT 4: BRIEF ENCOUNTER

DfT Rail was moving fast.

On 14 December 2006 a franchise management agreement was signed under which GNER would continue to provide ‘franchise services’ until termination. GNER had also agreed to cover DfT’s replacement franchise procurement costs.

While there was no management fee, DfT had set a ‘realistic revenue target’. If this was beaten, GNER would qualify for revenue and cost saving incentive payments.

Premiums would be replaced by ‘cash payments’ taken from GNER’s trading surplus at the end of each reporting period. Meanwhile, potential bidders for the replacement franchise had been asked to submit expressions of interest by 15 January 2007.

There were no surprises when the shortlisted bidders were announced: Arriva, FirstGroup, a 50/50 Stagecoach/Virgin joint venture and National Express.

Nor was the subsequent Invitation to Tender radical. The basic Service Level Commitment was the 2007 timetable plus the half-hourly Leeds services.

But there was still one twist.

In April Stagecoach and Virgin announced DfT had approved the acquisition of a 10% stake in their joint venture by GNER.

National Express was declared the winner on 14 August 2017. The new franchise would run from 9 December 2007 to 31 March 2015 with the final 17 months conditional on meeting performance targets.

While the time to prepare bids had been short by normal standards, the bidders could see what had brought down GNER. Nor had DfT accepted the highest bid, which according to informed sources had been submitted by Arriva.

Once again, we had the classic straight line constant growth graph, perhaps a touch steeper than GNER. Since GNER had crashed and burned DfT was challenged on the aggressive premium profile. Up stepped Transport Minister Tom Harris, who argued that GNER had been brought down by Sea Containers’ Chapter 11 filing rather than the over-ambitious premium profile agreed with DfT.

GOOD START

On taking over National Express East Coast (NXEC), NEG Chief Executive Richard Bowker was confident that the new management could create a ‘world-class railway’. At first all seemed to be going to plan.

FIGURE 2: NXEC AND GNER PREMIUM PROFILES COMPARED

Still a constraint: loco No 91101 powers VTEC’s 05.59 Newcastle to King’s Cross service over Welwyn viaduct on 19 May 2018. Jamie Squibbs

In October 2008, in a management statement for the first three quarters of the year, NEG reported like-for-like revenue growth at NXEC of 11%. In the four weeks to 12 October, Public Performance Measure (PPM) was 91.2%, the best since the start of privatisation.

However, the full year results, released in February 2009, revealed that the franchise was already feeling the strain of meeting that premium profile. With cap and collar protection not available until 2011, NXEC with its high cost base was ‘undoubtedly exposed to recessionary impact’.

Arguing that the franchise had been ‘constructed in very different economic conditions’, NEG revealed it had ‘engaged with the Government to explore ways to offset the impact of lower growth while delivering value through the franchise premia’.

This was, of course, the Government which never renegotiated franchises.

In April, Ray O’Toole, Chief Executive of the UK Division of NEG, wrote to Dr Mike Mitchell, DfT Director General of Rail and Strategic Networks, confirming that ‘whilst we are not in breach of any term of the franchise agreement, we will not be able to continue with the NXEC franchise on its current terms’.

NO RENEGOTIATION

Transport Secretary Geoff Hoon replied to NEG on 1 May recording the agreement reached in a meeting ‘last night regarding the NXEC franchise’. ‘NXEC and DfT will commence negotiations on a possible management contract as soon as possible with a view to finalising those negotiations by 31 May 2009’.

On 9 June, Lord Adonis, now Transport Secretary, met the National Express management team including Richard Bowker and Ray O’Toole. The civil service note of the meeting quoted Mr Bowker as saying NEG had ‘no viable alternative but to withdraw from the franchise from 1 July’ and that NXEC should then continue on a management contract until the franchise was re-tendered.

Formal acknowledgement of defeat came in a trading statement issued on 1 July 2009. Having failed to negotiate a rescue deal, the group would now continue to support the loss-making business until the committed funding was used up. This was expected to be ‘later in 2009’ depending on trading conditions.

Funding committed to the franchise was £84 million. There was a £47 million subordinated loan, of which £20.3 million had already been drawn down, plus the £37 million performance bond to meet DfT’s costs in the event of franchise default.

NXEC had lost £21 million in the first half of 2009. From 1 April the annual premium had risen by £98 million.

ADONIS EXPLODES

Despite having been in the discussions with NEG, Lord Adonis promptly hurled his teddies out of the pram on the NEG statement.

‘I’m simply not prepared to bail out companies which are unable to fulfil their commitments. This Government is not in the business of bailing out operators who can’t meet their commitments [because] all the other train operators would wish to receive a bailout. We are dealing with 16 franchises and 15 of them are operating fine’, he declared. If they were ‘operating fine’, why would they need a bailout?

In truth, DfT was concerned that other TOCs should be deterred from following NEG. This was illustrated by one of the proposals mooted for letting NEG off the hook, requiring a payment of £230 million to DfT plus NEG relinquishing its c2c and Greater Anglia franchises.

With the teddies flying, Lord Adonis continued: ‘National Express also operates rail services on the East Anglia main line and associated commuter routes.

The company has said that it does not intend to default on its obligations in respect of these franchises. Notwithstanding this, the Government believes it may have grounds to terminate these franchises, and we are exploring all options in the light of the Group’s statement this morning’.

Having taken legal advice NEG said it would challenge any attempt to terminate the two unaffected franchises.

ACT 5: SHADOW PLAY

Meanwhile DfT had established a publicly-owned company, Directly Operated Railways (DOR), which would take over ICEC when the NXEC Parent Company Support ran out. Elaine Holt, formerly Managing Director of First Capital Connect, had been appointed Chief Executive.

At the time the aim was to re-tender the franchise with a new operator taking over from the ‘end of 2010’.

FIGURE 3: ASPIRATION VERSUS REALITY - ICEC PREMIUM PAYMENTS COMPARED .

But NXEC was burning through the parent company support at the rate of £1.5 million a week and on 5 November Lord Adonis, having had a lie down, announced that NXEC would be terminated on 13 November. This was a month earlier than DOR had been expecting.

Clearly NXEC’s strategy of boosting short-term cash flow through increased sales of low-cost advance tickets had not staved off the evil day. This was at the expense of DOR’s revenue stream. When I interviewed Elaine Holt, who was also Chair of the renamed East Coast, she stressed it would be a ‘commercial operation’.

‘We’re focused on delivering for the Department, so from my perspective we’ve reset the financial targets and the business plan’.

DOR would be operating under a ‘deed of service’ rather than a franchise. Profits would be returned to Government, including the equivalent of a premium.

Payments to DfT were published for the first three years. These totalled £383 million less than NXEC’s equivalent premium profiles. Table 5 shows these figures along with actual payments made up to the start of the replacement franchise in 2015.

QUIET INTERLUDE

East Coast generated few headlines. It successfully introduced the new ‘Eureka’ timetable, including Lord Adonis’s 4hr Edinburgh-London ‘Flying Scotsman’. New Managing Director Karen Boswell worked very hard on employee engagement. It was not until June 2012 that DfT issued the consultation document on the replacement ICEC franchise.

This included the possibility of transferring Great Northern services running into King’s Cross to ICEC after Thameslink opened. Also mooted was the possibility of bringing connecting local services along the route into a ‘super ICEC’. Target date for the ITT was January to April 2013. But as East Coast’s third anniversary passed with no sign of action, Karen Boswell was concerned by the lack of direction for the business.

In February 2013, she set her team to work on developing a five-year plan through to the end of CP5 in 2019.

ACT 6: STAGECOACH – THE VORTEX

Two months later, following the Inter-city West Coast fiasco, DfT published a revised franchising schedule. An ‘immediate start’ to returning ICEC to the private sector would see the replacement franchise in place by February 2015.

With public pressure to keep East Coast in place or give DOR a chance to bid for the replacement franchise, Government ministers began rubbishing East Coast’s performance. In one example, Transport Minister Simon Burns claimed the franchise had ‘plateaued’, with PPM the worst of the 19 franchises.

A bridge too far? VTEC’s 07.52 Aberdeen to King’s Cross HST crosses the Tay Bridge on 16 May 2018. Ian Lothian

‘These contrasting figures show how private sector operators can outperform those from the public sector’ Mr Burns declared. This overlooked the presence of Virgin West Coast, which he had highlighted, only one place above the bottom of the PPM table.

Mr Burns next claimed the East Coast premium was less than that paid by VWC. This was true, as he had to concede, only if you overlooked the revenue support being paid to the Virgin franchise.

TRY AGAIN

When the ITT was published in March 2014, it emphasised the operational, financial and technical challenges. These included modelling a new timetable plus the testing and commissioning of the new Inter-city Express Programme (IEP) train fleet. In parallel, the European Train Control System (ETCS) would be commissioned between London and Doncaster.

Referring to the provision in the franchise agreement for the Transport Secretary to amend the Train Service Requirement, or ‘the manner in which Franchise Services are required to be delivered’, the ITT explained, ‘variations may result from changes to the specification or timing of committed projects affecting the franchise’. The provision also covered ‘other relevant financial, economic and technical developments and the implementation of developing rail policy’.

What DfT informed sources described as a railway ‘nothing like today’s East Coast’ was to be created in three stages. The first three years would see the existing service upgraded. Introduction of IEP would follow. Finally, in December 2019 the new timetable would offer more frequent services, shorter journey times and new destinations.

With procurement underway, East Coast reported on its final full year (2013-14). Ticket income was up by 4.5% in line with passenger journeys and payments to government rose to £234 million.

Also reported was a substantial claim launched against Network Rail for sustained poor Performance.

This was inherited by the replacement franchise and would be dropped by DfT in 2017.

AND AGAIN

Stagecoach and Virgin were announced the winners on 27 November 2014 and took over in March 2015. A two-stage premium profile saw an initial rise, followed by a dip in 2019-20 as the increased leasing cost of the new trains came in. Then it was back-end loading all the way with the premium in the final year more than double that in 2015-16 – the first full year.

What happened next is too recent a history for blow-by-blow coverage. For its 2015-16 financial year Stagecoach reported 5.2% revenue growth and cautioned that VTEC’s future profitability was more exposed to changes in forecast revenue, since it did not benefit from revenue support like the Group’s other franchises.

But from the start of 2017, the main UK transport groups had been reporting falling growth and profits in their rail businesses. And in April Stagecoach announced it had made provision for losses at VTEC over the next two years.

Negotiations had begun with DfT over resetting the franchise in the light of delays and deferments to the ECML infrastructure upgrades on which VTEC’s 2019 timetable had been based. But that was a side show. And while the franchise would continue to meet its obligations, including paying the premiums, just like GNER and NXEC, VTEC was burning down its parent support. On 16 May this year the Transport Secretary announced that a new operator of last resort, London North Eastern Railway, would take over ICEC on 24 June.

ACT 7: LNER – WAITING IN THE WINGS

At the time of going to press we were still waiting for the handover. Chairman of LNER is Robin Gisby, the founder of the Charterail piggy back service. Launched in 1990, it went into liquidation in 1992, brought down by British Rail’s high traction costs and access charges.

Mr Gisby joined Railtrack in 1997, responsible for freight. Subsequently he held a number of posts in both Railtrack and Network Rail, including Zone Director of the ECML from January 2001 to February 2003. His final role was Managing Director, Network Operations, which he left in 2015. Unlike DOR, which brought in new management, LNER is expected to be a lean organisation.

Current VTEC Managing Director David Horne and his team are expected to TUPE across to LNER, maintaining the continuity which will be vital while IEP is introduced and a timetable developed for 2020 which reconciles franchise and open access rights with infrastructure capabilities.

Richard George is also in the LNER mix. Mr George worked for British Rail InterCity before being involved in the management buyout for Great Western, becoming Managing Director of the new franchise.

When the MBO was bought out he moved into consultancy, including a period as Director of Transport for the London Olympics organising committee. According to Chris Grayling this team will ‘begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network’. That should be fun.

ICEC SHORTLISTED BIDDERS, 2014

■ Inter City Railways Limited (Stagecoach Transport Holdings (90%) and Virgin Holdings)

■ Keolis/Eurostar East Coast Limited (Keolis (UK) and Eurostar International)

■ East Coast Trains Ltd (FirstGroup)