Speculation grows over whether rail operator will be brought under imminent public control
Control of the Avanti West Coast rail franchise could be handed over to the operator of last resort (OLR) within the Department for Transport, sources claim.
The move would see services brought under emergency public control by a business that acts on behalf of the government when companies fail or breach the terms of their contract.
On Wednesday morning, the Board of Transport for the North made up of mayors and council leaders, unanimously backed a move to ask the Secretary of State to terminate Avanti West Coast’s contract and bring it into public ownership – fuelling speculation of an imminent decision.
It follows months of significant disruption and regular cancellations, owing in part to an irreparable breakdown in relations between staff and management.
In September, the joint venture between UK-based FirstGroup and Italian train operator Trenitalia had been awarded a lucrative long-term contract to keep running intercity services on the west coast main line.
At the time, Transport Secretary Mark Harper described Britain’s least punctual operator in the country as “back on track”, despite warnings from the RMT union that Avanti were “an unmitigated disaster”.
Ten days after the rail franchise was awarded its lucrative long-term government contract, the company would post record losses totalling £68.4million in the 27 weeks to 30› September, down from £8.7million at the same point one year prior.
The dramatic losses were incurred after First Group terminated its participation in two local government pension schemes.
Following the end of franchising, firms that operate passenger services have been paid a management fee by the Department for Transport, and are covered for most of their operating costs.
While the management fee is not disclosed to the public, public accounts show the Department for Transport has paid Avanti £1.175 billion to run its service since the pandemic.
According to First Group’s latest yearly profits to March 2023, Avanti made a pre-tax profit of £12.8m and subsequently paid dividends of £11m to its shareholders, mainly First Rail Holdings.
Two months later, it would relinquish control of the TransPennine Express rail franchise, after months of cancellations and delays.
All decisions, including payments to shareholders, were signed off by Transport Secretary Mark Harper.
Earlier this year, Novara Media reported that during an internal company presentation in January of this year, senior management at the operator revelled in the “free money” provided by the taxpayer.
The slides joked that Avanti West Coast would be awarded performance-based bonuses by the Treasury for achieving a less-than-perfect service in a scheme labelled “too good to be true”.
The “regrettable” presentation was presented shortly after the Christmas period, in which just shy of half of Avanti West Coast’s trains arrived on time, with 23 per cent cancelled altogether at short notice.
East Coast Main Line (LNER), Northern Rail, Southeastern Trains, and TransPennine Express are all currently operated under public control by the Department for Transport’s operator of last resort (DOHL).
The DOHL group currently runs more than 3,600 trains a day and employs over 14,800 staff.
It means currently nearly 25 per cent of all train journeys are taken on nationalised rail services.
Appearing at a Transport Select Committee in September of last year, Rail Minister Huw Merriman confirmed that there were no immediate plans to re-privatise the contracts it’s taken over through the Operator of Last Resort.
Merriman said the OLR was running its franchises very well: “the performance across their stable across every single one of their four operators has gone up if you look at June/July’s performance”.
One of the operators under public control, LNER, has seen record passenger usage.
Between January and March 2023, passenger journeys were at 111 per cent when compared with the same pre-pandemic period for 2019.
The Department for Transport said not to expect an announcement today (Wednesday).
The National Rail Contract awarded to First Trenitalia in September of 2023 will have a core term of three years, after which the Department could terminate the contract at any point with three months’ notice.
FirstGroup and Avanti said while they were aware of nationalisation rumours, they believed them to be false.
