Going off the rails?

BBC NEWS | Business | GNER owner ‘cannot pay huge debt’

Oh dear, oh dear. It all seems to have gone a bit wrong. It’s not that long ago that GNER, with a lot of support from regular passengers[1], successfully campaigned to retain the franchise for the East Coast Main Line service.

Since then, they’ve had some problems. They’ve had to pay a lot more for electricity, which is a problem when you’re running electric trains. After the bombings last July, passenger numbers fell, which reduced their income substantially. But the biggest problem was self-inflicted. The government’s system is simple: the franchise goes to the highest bidder in a sealed-bid auction. For less profitable routes, its more a case of who will do it for the smallest subsidy, but for the East Coast route, it was a matter of who would offer the government the most money. And GNER offered a lot of money indeed. Far too much money, as it happens. The bid was based on somewhat optimistic income forecasts, which have proved to be ever so slightly inaccurate, given the drop in passenger numbers, and the large increase in costs.

Formerly supportive passengers aren’t so happy these days, especially after fares went up by very large amounts.

But GNER’s biggest problem has been that its parent company is in serious financial trouble. Sea Containers has to pay around £60 million by Sunday, and does not have the money. GNER’s options are limited. They can try to cut costs, which would inevitably mean cutting staff and services, or they could withdraw from the franchise altogether. If they were to do that, they would have to pay a substantial penalty to the government, but as the size of the penalty fee will be much larger if they withdraw later, it would make sense for them to do it soon.

And if they do that, the government will take charge of the service. The same trains would run, with the same crews.

Oh what fun…

[1] Including me, back when I used to go to London a lot more than I do now

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  1. Pingback: Off the rails… : Losing it

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