Tuesday, 31 March 2015

Franchises and Rolling Stock Cascades: the Merry-Go-Round of the Privatised Railway

One of the most common myths of the privatised railway is that the companies own the trains they operate. Nothing could be further from the truth: in fact, how the "rolling stock" of trains and locomotives is managed is probably the most complex part of the puzzle that makes up the fragmented, privatised British railway network.

With the trains owned by three rolling stock holding companies (ROSCOs), and each passenger operator running under a franchise from the Department for Transport (DfT), in a perfect free-market railway each franchise would be free to obtain rolling stock from any of the ROSCOs. But often there are only so many trains which are suitable for a particular route: long-distance trains on the West Coast Main Line (WCML) pretty much have to be Pendolinos or Voyagers, because they're the only trains that can tilt. Moreover, franchises are constrained by how much subsidy they get from the DfT: it costs more to buy a new fleet of trains than to just keep running the old ones.

How much subsidy a franchise gets is decided by the bidding process: companies compete for the rights to run trains in a particular area for, say, ten years or so. While the DfT decide the winning bid based on a number of different factors, often - but by no means always - the franchise goes to the company demanding the least subsidy. This means that a decision on whether to order new trains, thus requiring more subsidy, forms an integral part of a franchise bid.

As a result, the biggest news to come out of any franchise announcement is what new trains will be ordered, and where existing stock will move: last Monday's announcement of a new 3½-year deal for First to run the Great Western franchise was no exception. In addition to the already-planned IEP, two new train fleets, one for Thames Valley commuters and one for travellers between London, Devon and Cornwall, were announced to great fanfare.

But this announcement - together with last month's Invitation to Tender for the new Northern and TransPennine franchises - marked a significant departure in DfT policy. Until now, the DfT has insisted that it has no national plan for rolling stock, and which trains are used where is a matter for the operators. Here, however, we see the DfT deciding, for the first time, which trains should go where. Why has there been such a change in policy?

One result of the franchise bidding process is that moving entire fleets of trains between lines is most easily done when a franchise expires. Often the introduction of new trains for one particular line can lead to a "cascade", as the older fleet moves to another line to replace an even older fleet, and so on. In the days of British Rail, railway managers were free to move rolling stock around to meet demand. The key difference between then and now, however, is that under the privatised railway such cascades have to be negotiated and planned, piece by piece, several years in advance, in contrast to the simplicity of single management decisions by British Rail.

A classic example of such a cascade under British Rail was the building in 1989 of the Class 321s for WCML commuter services between London Euston and Northampton: their introduction meant that the Class 317s (dating from 1981) could be cascaded onto Great Northern local services between King's Cross and Cambridge, which in turn released the Class 312s (dating from 1975) to run services between Liverpool Street and Clacton. One new fleet built, but three lines end up with more modern trains.

As long as the DfT insist that they have no national rolling stock plan, such a cascade is much more difficult to organise, and becomes a long, protracted affair (if indeed it can happen at all). But the massive electrification projects presently being undertaken by Network Rail will require a huge cascade, with electric trains moving from existing lines in the south-east to the newly-electrified lines elsewhere. It seems that the DfT has finally decided it can no longer sit back and leave it all to the operators.

To the DfT's credit, it was foreseen from the outset that the first phase of the North-West Electrification would allow electric operation of services between Manchester, Glasgow and Edinburgh as early as December 2013, during the life of the existing TransPennine Express (TPE) franchise: as a result, an order for 10 new 4-car Class 350 "Desiro" units was tacked onto an existing order by London Midland, and they entered service with TPE over the course of the winter of 2013/14.

But with new Northern and TPE franchises due to begin operating in April 2014 and April 2015 respectively, the plan was to leave it up to the bidders to propose which trains to use on the newly-electrified lines in the North-West as they went live from December 2014 onwards. Even though the electrification between Liverpool and Manchester was planned explicitly as somewhere to send the Class 319s after they became surplus to requirements at Thameslink following the introduction of the new fleet, the new operators would not have been required to use them.

Then the InterCity West Coast franchise deal collapsed.

Back in August 2012, I wrote a blogpost heralding the arrival of First West Coast, to replace Virgin Trains on long-distance services between London, Birmingham, Manchester, Liverpool and Glasgow on the WCML. But six weeks later, the DfT were forced to admit, on the eve of a court case brought by Virgin, that they'd got their sums wrong. The franchise deal was cancelled, and Virgin celebrated what they saw as snatching victory from the jaws of defeat.

In the aftermath of the West Coast débâcle, the whole DfT process of franchising was suspended for over a year while a full review was carried out. With a large number of franchises having been due to expire during 2013 and 2014, many franchises were awarded extensions without further bidding: in the InterCity West Coast example, Virgin were first awarded an extension from December 2012 to November 2014, which was later extended again to run until March 2017. Only then will another franchise competition lead to a (potential) change of operator; until then, Virgin Trains will continue to operate.

More importantly, the current Northern and TPE franchises have been extended until February 2016. With the wires between Liverpool, Manchester and Wigan going live in early 2015, the DfT were forced to step in to ensure that 14 Class 319s - later upped to 20 - would be transferred from Thameslink to Northern through 2014 and 2015. Even then, it will be late in 2015 before enough 319s have transferred north to cover all the possible electric services, even though the wires are already in use as of Thursday 5th March.

The delay is ultimately due to delays to the Thameslink Programme: the Class 700 trains - due to replace the Class 319s - are running a bit late. To allow some 319s to be released as soon as possible, in December 2012 the DfT essentially used Southern as an "agent" to procure 29 new 4-car Electrostars from Bombardier, classified as Class 387. Although two-thirds of them are already in service, with the rest following over the next few months, these 110mph trains were intended only as a stopgap: once the Class 700s arrive they'll be surplus to requirements at Southern.

This week's announcement of the new Great Western franchise has put one more piece in the puzzle of the ongoing rolling-stock cascade: the Class 387s were destined for the Great Western Main Line (GWML) to run Thames Valley commuter services post-electrification. While the North-West electrification couldn't really justify brand-new trains, commuter services on the GWML are some of the most overcrowded in the country, and are thus a logical fit for the Class 387s.

To bolster capacity on the GWML, the 29 Class 387s currently entering service will be transferred to Great Western, and will be supplemented by another 8 newly-built Class 387s. Additionally, 21 of the 40 Class 365 fleet currently used by Great Northern services between King's Cross, Peterborough and Cambridge will also transfer over to the new Great Western franchise by 2018. This will enable Class 165 and 166 trains currently operating in the Thames Valley to move to Bristol, displacing other diesel trains from there (the details of which are yet to be confirmed).

Again, however, thanks to the delays, this Great Western franchise is really just an extension of the existing First Great Western franchise that's operated, in some shape or form, since privatisation in 1996. In other words, this hasn't emerged as the result of a competitive tender: for the first time the rolling stock movements have been specified by the DfT.

And there's more: last month, the DfT released its "Invitation to Tender" for the new Northern and TransPennine franchises, due to take over in February 2016. These describe the services that the operators are obliged to run, and other conditions. Unusually, the DfT has specified some quite stringent conditions on the rolling stock to be used by the new franchises: the biggest headline was that the new Northern franchise would not be permitted to use Pacers from 2020 onwards.

I've written about Pacers many times before: put simply, they were built in the early 1980s out of bus parts, as a cheap way of keeping rural lines open by reducing operating costs. Most importantly, they are the only trains which have fixed axles, rather than bogies with proper suspension, and the ride quality can thus be quite poor. To a certain extent, the fact they are concentrated in the north of England means that trains across the north are not perceived as a pleasant way to travel, and they may even be suppressing demand as a result.

To replace the Pacers, the Northern franchise must procure 120 new carriages of diesel trains. Other than that, though, most of the Invitation to Tender gives the bidders a fair amount of freedom on which trains to use, and it remains to be seen exactly which electric trains will move north. Surely, though, given that the Class 319s are already established in the North-West, it would be cheapest - and most sensible - for bidders to recommend more 319s transfer north to cover the remaining electric services. We'll have to wait and see who wins.

So is the DfT likely to continue specifying which trains a franchise should use, or will the free market prevail? A lot of that will depend on who wins the next election: the scrapping of the hated Pacers is a very good vote-winning policy, and it can hardly go unnoticed that the Secretary of State for Transport, Patrick McLoughlin, was joined in making the announcement by the Deputy Prime Minister, Nick Clegg, whose Sheffield constituency could vote him out in May.

For now, though, the announcement of the Great Western franchise brings some more clarity to the inevitable rolling stock cascade, which currently looks like this:

And that's just what we know about already! That doesn't tell the story of what happens to the 59 remaining Class 319s, or what becomes of the stock that is displaced by some of these moves, or which trains will be scrapped. For that, as always, we'll have to wait for the next franchise announcement...

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