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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.

Category

General

Comments (25)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Pete says:
    10 Dec10 December 13:32

    A slightly sensationalist headline, Rob, as nothing really changes for the passenger or even in terms of operation, really. Every franchise will now have to go through this – the slightly more exciting bit will come if the owning groups and the DfT can’t agree terms to terminate!

  • Paul says:
    10 Dec10 December 13:38

    Management/operation contracts do seem to be best way forward, at least it works for London Overground and TfL Rail.

  • Barry says:
    10 Dec10 December 13:50

    Funny how they let the ROCs walk away with a pat on the back and guaranteed profits from management fees under the new system, yet were blaming the funding shortfall on TfL on the Mayor even though finances were in perfect order there before the effects of the pandemic hit.
    More hypocrisy from this Tiry excuse of a Government.

    • Charlieface says:
      10 Dec10 December 15:31

      That’s not strictly true. TfL had a big funding shortfall due to delays with Crossrail impacting ticket revenue. Who’s fault that was is a different question…

      • Murray Colpman says:
        12 Dec12 December 20:10

        TfL’s funding shortfall is almost entirely due to the dramatic drop in traffic due to COVID. True they were substantially squeezed beforehand and were cancelling capital projects left and right but that had been the case ever since Boris and Osborne agreed to cut the central government subsidy…

  • Anthony Dunn says:
    10 Dec10 December 15:31

    I wonder if anyone has done a calculation of the amount of cash squandered on the multiple versions that of a privatised rail system since the Major government first inflicted this ideologically driven distraction? And let no-one forget that taxpayer support didn’t (as was claimed during the privatisation process) fall to zero but actually increased to levels that the British Rail board could only have dreamed of.

    • Callum says:
      10 Dec10 December 17:50

      If you’re referring to taxpayer support to Network Rail, how is that relevant? The exact same track maintenance needs to be done regardless of whether the trains running on them are privately or publicly operated and was more expensive because it had been chronically underfunded beforehand.

  • Baji Nahid says:
    10 Dec10 December 15:41

    nectar are really being shot out here, there will be little to none collection of nectar points on transport now.

    Also transpennine express needs to be under goverment control. Shambolic services and thats me being nice.

  • Super Secret Stuff says:
    10 Dec10 December 15:52

    Ooooo, interesting. SWR doesn’t surprise me, was losing a ton of money. Avanti does a bit, because its profitable now but the outlook is grim due to investment needed to adjust when HS2 is operational. Very surprised the goverment didn’t ask for compensation for Avanti.

  • Nick says:
    10 Dec10 December 16:27

    Come on Rob, standards slipping…
    First Group also controls the GWR franchise, which appears to be staying.

    And no mention of the ‘miles and points’ angle?! In other words, what does it mean for members of the ‘Traveller’ Club?

    • Nick says:
      10 Dec10 December 16:28

      Tongue firmly in cheek by the way. Well done for getting to this before the BBC, Sky, etc.

  • Mike says:
    10 Dec10 December 17:07

    How long did Avanti operate before the Pandemic hit? 3 months?

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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