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Avanti West Coast and South Western Railway franchise termination deal agreed

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Transport company FirstGroup announced this morning that it has agreed terms with the Department for Transport to terminate two of its rail franchises – Avanti West Coast and South Western Railway.

This moves the UK rail network one step closer to being renationalised, with trains run by third parties under fixed fee management contracts.

Avanti West Coast franchise terminated

As with the majority of UK rail services, Avanti and South Western services are currently operating under Emergency Recovery Measurement Agreements. These were negotiated with the Government to ensure that trains continued to run during coronavirus despite the lack of passengers.

The Avanti West Coast franchise is being terminated with no penalty fee as it had been performing profitably.

South Western Railway – which is 30% owned by MTR, operator of Hong Kong’s metro – will need to pay an additional £33 million, on top of the loss of performance bonds, to partially compensate the taxpayer for the losses it will now be taking on.

South Western Railway franchise terminated

FirstGroup is not entirely out of the picture

The Department of Transport is now negotiating with FirstGroup on the terms of a management agreement for both franchises.

This would see FirstGroup overseeing South Western Railway until April 2023 and Avanti West Coast until April 2026. FirstGroup would be paid a management fee for operating the service but would take no revenue risk.

No deal has yet been agreed for the TransPennine Express franchise, also run by First Group. A penalty payment will be required from FirstGroup in return for the Government taking over the loss making service. Great Western Railway, the other First Group franchise, appears to be continuing in its current form until the existing deal expires in 2023.

There is no word on whether Nectar points will continue to be offered under the new management contracts.

The official Stock Exchange announcement by FirstGroup is here.

Comments (25)

  • MKB says:

    The end of the Virgin-created, now Avanti, Traveller scheme can’t be far away then. That will be the end of my two free first-class tickets on their network every weekend, not that I have been able to make much use of them since March.

    Avanti even announced this week that checking availability and making bookings for free travel cannot be done on the new booking engine they have just rolled out. So you now have to call up during office hours, if you can get through.

    Frankly, they should be rolling out the red carpet for anyone still doing the requisite amount of first-class travel to be a Traveller member, not alienating them.

    • Smid says:

      Traveller membership was barely worth the bother nowadays anyway, it was useable when they cut back the peak trains, but when they cut Monday and Friday and kept the overnight restriction, it really was only for a Saturday night overnight trip. Got a bit more value when they bumped up the upgrade price on the weekend, but advance tickets would fix that. I think I had it for a year and a half on its last incarnatio, while commuting to/from London Monday, back Friday, and used it once in 18 months.

  • Aston100 says:

    I’m sure this corrupt government will find ways for their cronies to benefit in some way from all of this.

  • Michael says:

    So the Tax payers take the risk . And a third party runs a service with no risks ? I bet there happy , why don’t we just cut out the middle man and fully renationalise the railway . It’s failed . Too many companies involved . One company and get rid of all those managers and directors on a gravy train . It should either be all 100% private with no subsidy at all from the DFT and the entire operation everything should be paid for by the company. Or it should be state owned the entire system .

    • Track says:

      Then you will have a new Authority and its CEO and Directors with commercial remuneration — within the gift of the relevant department.

      The railways might go bankrupt or stop working at all, the gravy train will continue regardless.

      • Lady London says:

        …you have just described what the railways were like before de-nationalisation

    • John says:

      People call BA London Airways. What do you think would happen with trains if they were fully privatised.

      First Group has lost 90% of the capital they put into SWR