Vigin & train franchises – explain to me how this is good practise.

I do not understand how these work.

So Virgin has lost its franchise & First Group take over as soon as December this year.

Apart from the issue that I can not see how the country expects any company to invest when they can loose the franchise so suddenly I wonder what happens to all the employees & the trains.

Please explain.

Here is the first post I made in the last thread about this:

Angel Trains (a ROSCO) own the rolling stock (Pendolinos were built by Alstom with the WCML in mind) and lease to Virgin (well, technically the current franchisee of the WCML).

I think it was a vanilla lease, so there will likely be a mechanism which allows the new franchisee to take the lease of the existing rolling stock (which makes sense, given that it would be pretty pointless running them anywhere else and I can’t think of any replacement stock).

First will just change the livery.

Should assume that many of the employees will have the oppurtunity to TUPE over?

Where I work at the moment we run the roads for the Highways Agency. The company who currently does that is changing, so employees can transfer over to the new company and keep their T&C’s (broadly speaking).

I would assume its similar in this case, I could however be miles out!

Aren’t emplyees protected uner TUPE rules as well? Same deal with motorway maintenance – if the govt changes the contract then all employees have the option of moving to new company with same basic Ts & Cs.

What crispo said.

The idea is that if you have 4 or 5 private companies responsible for different elements of the same whole and each has to make a profit and incour separate finance legal and admin costs it will provide a cheaper better service than one organisation responsible for the lot.

The idea is that if you have 4 or 5 private companies responsible for different elements of the same whole and each has to make a profit and incur separate finance legal and admin costs it will provide a cheaper better service than one organisation responsible for the lot.

So not unlike supermarkets then where they no longer run their own supply chains / grow the food they sell (with the exception of Co-op) and still manage to be amongst the cheapest in Europe for a similar basket of goods exc. VAT…

A few years back the east coast main line was aquired by National Express who payed way over the odds for the service, a year or so later they wen’t bust as they has massively over estimated what they could charge people to trvel, that service in now publicly owned and run under the banner East Coast Trains.

The two times the company changed my old man who worked on the trains got letters through from the unioin and new contracts were arranged so no benifits were lost. At the end of the day the new employer needs the staff from the old buisnes to keep things going.

If First have as reported on the local news here in Aberdeen have paid substantially more for the service than Virgin were willing to pay i would say it will be highly unlikely that fares will remain the same and traveling by train will become much more expensive.

So not unlike supermarkets then where they no longer run their own supply chains

Err?

Tesco has one of the largest (if not the largest) in house supply chain operations in the UK. Outsourcing supply chain within the retail industry is seen as rather old fashioned or for smaller operators. Delivering stuff to shops is a core competancy for a retail chain, they have scale to make it effective, why just give money to someone else when they add very little value?

Sainsbury’s, Morrisions, Waitrose, M&S, etc all run their own supply chains with only small descreet activities out sourced.

Transport is the only thing that still gets frequently oursourced but even that is reducing. Tesco have the second largest fleet of vehicles in the UK after the Royal Mail.

interesting.

I still think the system is anti long term investment. When a company knows it cold loose it’s franchise in a few years time it will not invest in case it looses the contract.

When a company knows it cold loose it’s franchise in a few years time it will not invest in case it looses the contract.

It’s not as simple as that though. There are a load of contractual and performance requirements during the franchise term which absolutely require investment in order to meet/satisfy them.

If you don’t meet them, then you’re looking at deductions at best, and termination at worst.

It’s a fine balance between capital and operational investment, ticket prices and meeting required contractual standards and performance targets, which is why some franchises become massively unprofitable despite appearing to be performing well.

Most of the costs during the franchise term are not capital though – the biggest perceived cost is the rolling stock itself, but it’s pretty much always leased, with maintenance as part of the package, so in the event that the franchise is terminated you’re not sitting with a very expensive and useless asset.

ALL potential franchisees will only every structure a franchise bid on the basis of running for the initial franchise term, it would be corporate suicide to do otherwise (as we have seen, franchisees do change!), but the level of investment the public sees should remain the same over the years, it’s just that it will be from different entities.

What WOULD make more sense is for vertical integration – the PTE takes ownership of both rolling stock AND the network infrastructure and awards the ability to run services on a concession basis (like Mersytravel/Merseyrail, one of the best performing services in the UK) on a much longer term than a normal franchise (e.g. 30 years v 8 years) but with plenty of options to profit share, make performance deductions and terminate if required.

But that’s just a pipedream.

Tesco has one of the largest (if not the largest) in house supply chain operations in the UK. Outsourcing supply chain within the retail industry is seen as rather old fashioned or for smaller operators. Delivering stuff to shops is a core competancy for a retail chain, they have scale to make it effective, why just give money to someone else when they add very little value?

But the suppliers and the producers / manufacturers are also part of the supply chain. Including the delivery of these goods to the Supermarket’s distribution centres, so it’s wrong to say that big supermarkets own the entire supply chain. In fact, they generally only own the chain from the distribution centres to their stores, and quite often that’s done by third parties (the likes of Wincanton etc).

So not unlike supermarkets then where they no longer run their own supply chains / grow the food they sell (with the exception of Co-op) and still manage to be amongst the cheapest in Europe for a similar basket of goods exc. VAT… Due to being massively subsidised by the British government and taxpayer despite making huge profits.

So, yes there are some similarities. Subsidise private companies and hopefully they make a profit for their shareholders.

What WOULD make more sense is for vertical integration – the PTE takes ownership of both rolling stock AND the network infrastructure and awards the ability to run services on a concession basis (like Mersytravel/Merseyrail, one of the best performing services in the UK) on a much longer term than a normal franchise (e.g. 30 years v 8 years) but with plenty of options to profit share, make performance deductions and terminate if required.

Merseytravel are our transport providor, and a very good job they do, sadly seriously let down by network fail, who regularly have signal and power failures, along with little information when things go wrong, althought merseyrail does its best to keep things going usuiing hired in buses, or the ferries.

The thing is there are plenty of 507 and 508 units in store, but to rent them costs a lot, something the governmnet want allow them to do.

But we may well be getting new chinese trains in the near future.

BIKES ALSO TRAVEL FREE ON ALL TRAINS, ANYTIME.

Merseytravel are our transport providor, and a very good job they do, sadly seriously let down by network fail, who regularly have signal and power failures, along with little information when things go wrong, althought merseyrail does its best to keep things going usuiing hired in buses, or the ferries.

The thing is there are plenty of 507 and 508 units in store, but to rent them costs a lot, something the governmnet want allow them to do.

But we may well be getting new chinese trains in the near future.

I acted for MT for a good number of years (a truly visionary PTE, led by a man who actually wanted to change public transport in Merseyside and fought extremely hard to improve things), so you can understand how your comments re network failures (since the network is owned and maintained by Network Rail, not Merseytravel) tie in with my own views on why some PTEs may be better placed to take ownership of the network.

Unfortunately I can’t really comment on whether you’re likely to get new trains or not 🙂

But the suppliers and the producers / manufacturers are also part of the supply chain. Including the delivery of these goods to the Supermarket’s distribution centres, so it’s wrong to say that big supermarkets own the entire supply chain.

WTF has that go to do with anything? Food shops never did everything growing/rearing, processing, shippin, selling etc. They bought the stock at wholesale from a market and sold it a retail in their shops.

What relevance that has to outsourced supply chain operations is beyond me.

The original point made was that supermarkets are profitable, despite large parts of their operation being done by othere who need to make a profit. Therefore justifying the fanchise system for the railways.

My point was that actually large retail chains are realising the outsourcing there entire distribution network was neither good for profits nor service and the current trend was to do as much as possible in house.

I.e. I was refuting the original point, not trying to have a fundamental debate about who makes our food.

In fact, they generally only own the chain from the distribution centres to their stores, and quite often that’s done by third parties (the likes of Wincanton etc).

This bit is incorrect. Outsourcing to third parties is reducing and supermarkets in particular are realising the more influence they have on their upstream supply chain the better (higher profits, less disruption to supply etc)

acted for MT for a good number of years (a truly visionary PTE, led by a man who actually wanted to change public transport in Merseyside and fought extremely hard to improve things)

and they got a huge new office at huge cost for the next large number of years, while their old owmend office is sold for peanuts, just perhaps they should have moved to a buissness park, with transport links at a cheaper rent etc.

But other than that they do good work, failed by network fail though.

It very much looks like the government procurement exercise has been a box ticking process that has gone to the lowest bidder with little or no account taken of the outcome almost certainly being rubbish.

Finally merseyrail was designes as a stand alone entity, like the isle of white railway, the line is truncated at Chester and Ellesmere port, southport, because thats where the 3rd rail runs out, and at ormskirk and Kirby where buffer stops stop the trains going any further, and thus stopping any freight or other services running.