FirstGroup to fight Virgin on East Coast

A request by FirstGroup to start open access services between London and Edinburgh on the ECML has been granted by the ORR, though a rival application by GNER was rejected. The Rail Regulator has also allowed East Coast franchised operator, Virgin Trains East Coast (VTEC), to run more services and serve additional destinations.

FirstGroup has a 10 year track access contract and will provide five off-peak trains, each way, between London and Edinburgh by 2021. Trains will be single class and will additionally call at Stevenage, Newcastle and Morpeth. New trains “comparable to IEP stock” will be built.

The decision means that FG will be competing with VTEC for the lucrative ECML market, though it says it is targeting the airlines. FG already owns pioneer open access operator Hull Trains.

But Arriva-owned GNER open access plans fared less well:  GNER’s bid to run the “fastest ever” London –Newcastle-Edinburgh service using tilting trains was rejected by the ORR on grounds that, “its costs are likely to exceed its benefits and the benefits are likely to be low relative to the alternative uses of capacity proposed.”

GNER had no more success with its London-Cleethorpes/West Yorkshire bid. Here the plan was to combine two applications: one from London to Cleethorpes, Grimsby and Scunthorpe via Doncaster; the other from London to Bradford and other West Yorkshire destinations with a new station in East Leeds. ORR feared the latter service would result in “significant absolute levels of revenue abstraction” from VTEC (the franchised operator).

That effectively scuppered the scheme; GNER maintained that without the Leeds portion the Cleethorpes service alone would not be viable.

The ORR has also endorsed VTEC applications to run more services on the ECML: There will be an additional hourly service to Edinburgh; and Bradford, Lincoln, Harrogate and Middlesbrough will also get direct services to London.

Firm rights have been granted for the Bradford, Lincoln and Harrogate services from May 2019; and  those to Edinburgh and Middlesbrough from May 2021.

The additional Edinburgh trains  will depend on Network Rail enhancing  capacity. Currently the ECML can accommodate six – VTEC accounts for around five – long distance high speed off-peak train paths per hour. NR plans to increase this to 7.5 for the May 2021 timetable. That will entail substantial infrastructure works, including four-tracking at Woodwalton (south of Peterborough) and grade separation at Werrington (north of Peterborough).

FirstGroup also own open access operator HullTrains
FirstGroup also owns open access operator HullTrains

All open access operators have to pass ORR’s NPA (not primarily abstractive) test; a successful applicant must generate more than 30p in new traffic for every £1 in revenue it abstracts from a franchised operator. “We have not rejected any application on the basis that it did not meet the NPA test threshold,” says ORR.  Capacity appears to have been the main consideration – it being impossible to accommodate all FG, GNER and VTEC applications with existing services (which would have required more than eight train paths per hour).

Arriva has suffered a double-whammy: Not only have GNER’s applications failed but Arriva-owned open access operator Grand Central (which also operates on the ECML) fears  VTEC’s additional services will have a “devastating effect” on its finances.  ORR consultants CH2M estimated the possible maximum impact at £7m per annum, but the ORR did not believe GC would respond by withdrawing  services to “any significant extent”.

FirstGroup has good grounds to cheer;  Chief Executive, Tim O’ Toole, commented: “We will offer genuinely low fares at half the average price of today, while adding significant benefits to the UK economy. Our brand new trains will be cheaper than other rail services, greener than the plane, quicker than the coach and will get passengers from London to Edinburgh earlier than they can arrive today, all for the average fare of less than £25.”

ORR decision letter:

http://orr.gov.uk/__data/assets/pdf_file/0006/21885/2016-05-12-ecml-decision-letter.pdf

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