Should train operators take control of the tracks?

The dust is still settling from last week’s government call for greater integration between Network Rail and the train operators. Details remain scant but more will be known when a green paper ‘Rail Vision’ is published next spring.

Transport Secretary Chris Grayling wants integrated operating teams to bring trains and track back under unified management control: “They don’t have to work for the same company. They do have to work in the same team,” he says.

But he has no plans to dismember Network Rail or change the franchising system.

Integrated operating teams will be imposed as a franchise condition  when new contracts are drawn up. The next ones will be South Eastern and East Midlands, but nothing will happen before 2018 at the earliest.

With at least a dozen other franchises to manage it will take the DfT many years to bring the other TOCs into line.

Grayling also announced that a new and separate organisation will be set up for East West Rail, the planned cross country link between Oxford and Cambridge. The Autumn Statement allocated £110m towards the project, which will use private sector money to design, build and operate the route.It will not come under Network Rail jurisdiction though and it will be a vertically integrated and managed organisation with unified control of trains and track.

This news also coincided with Network Rail’s appointment of Professor Peter Hansford to chair an independent competition and contestability review and report back next spring. Chief Executive Mark Carne wants Network Rail to act more like a private business and is keen to attract third party funding.

Some observations

Are the planned reforms for integrated operating teams feasible, affordable or even desirable? Will they simplify the system or just add another level of complexity? Cut costs or drive them up? And how much re-organisation, if any, will be required?

No one can answer these questions with any certainty as there are few details yet on how the new set up will work. New legislation, however, will not be required.

A few things are clear though.

Firstly, and contrary to some media coverage, train operating companies will not be taking control of the tracks or become responsible for maintenance. That role is beyond their expertise and it will continue to be undertaken by NR (or by specialised bodies operating on its behalf).

In terms of economic clout there is an enormous disparity between Network Rail and the train operating companies. Network Rail is not just the elephant in the room; it is the room, and the TOCs, in comparision,  are little more than flies on the wall.

The train operating companies are ephemeral bodies. They have no assets. They don’t own the track or the stations, or even the trains they use, which have to be leased. So getting TOCs to contribute towards infrastructure upgrades – if that is the plan – will be very difficult as the expected benefits will have to be recouped during the lifetime of a short franchise term.

Chiltern may be cited as an exception to the rule, but special circumstances apply in this case. The train operator contributed £130m towards the newly completed Oxford link and NR stumped up the remaining £190m. This is unusual but Chiltern has an exceptionally long franchise (19 years), it is largely a self-contained operation, and the project forms part of the wider East West scheme.

Chiltern exception to the general rule?

Secondly, integrated operating teams are nothing new. The South West Alliance was trialled by NR and SWT in April 2012 but disbanded in June 2015 (two year earlier than planned). Had it been successful it would presumably still be in place. The ScotRail Alliance (between NR and Abellio) integrated operations north of the border earlier in the year, but it is struggling to cope and has come in for much public criticism since.

The only other part of Network Rail where track and trains have been integrated so far is on the Isle of Wight, but that’s due to unique circumstances – namely, an isolated branch worked by a single operator.

Thirdly, problems arise when two or more train operators have to share tracks. This happens frequently as many franchises overlap. On the WCML, for example, Virgin Trains (the dominant operator) shares the infrastructure with at least one other operator – and some times with several – all the way from Euston to Glasgow. It’s a similar story on other busy lines.

In addition to meeting the needs of 19 very different franchised operators, Network Rail has also to find paths for freight operators (FOCs) and non franchised open access passenger operators (OAOs).

Freight operators (FOCs) are worried about being squeezed out or side-lined  in a passenger dominated set up. Unlike passenger traffic there are no votes in freight; if freight trains – the traditional aunt sallies of the industry – are late, or cancelled, it does not make headline news or lead to questions in Parliament. Open access operators might find themselves in a similar predicament; their plans could thwarted by hostile TOCs intent on promoting rival services.

If the FOCs and OAOs are excluded from the integrated operating teams they will be disadvantaged and might face discrimination, but if they are included it could provide grounds for even more disagreement and delay.

Network Rail has set up a  ‘virtual’ route for freight operators to mitigate some of these possible sources of conflict but it is still not clear how all the pieces in the jigsaw will fit together at this stage.

Freight train and open access passenger operators could be disadvantaged under the new regime.

Another point: Network Rail’s investment programme is based on five year control periods, and is in no way synchronised with the investment plans of the TOCs, which all operate to different schedules. Also, there’s some mismatch between NR’s operating route network – to which more decision making is being devolved – and the TOC operating areas.

Five DfT franchises – c2c Rail, Chiltern, Greater Anglia, Southeastern and SWT – operate exclusively (or near exclusively) within a single NR operating route, but the other eleven DfT franchises operate in two or more. Cross Country is the most widely travelled accessing eight out of ten routes. The following table gives some idea of the complexity:

 

                             Geographical overlap of rail franchises and operating routes, 2014-15
                    Total train km (million); distance travelled by train operators in each operating route
NR Route: Anglia Kent LNE LNW EM Ssx Wsx Westn Wales Scotland  Totals
Franchise                      
Essex Thameside   6.7    –    –    –    –    –    –    –    –    –     6.7
Chiltern    –    –    –   10.2    –    –    –    –    –    –   10.3
Cross Country   1.3    –   6.4     8.1   4.3    –   1.6   8.1   0.9   2.0   32.7
East Coast    –    – 19.5    –    –    –    –    –    –   2.4   21.9
East Midlands   1.2    –   4.5     1.5 15.4*    –    –    –    –    –   22.7
Greater Anglia 34.2*    –    –    –    –    –    –    –    –    –   34.2
Great Western    –    –    –    0.1    –   0.6   3.3 35.5*   3.3    –   42.8
Northern    –    – 24.0*  21.6   0.5    –    –    –    –    –   46.1
South Eastern    – 31.4*    –    –    –   0.4    –    –    –    –   31.7
South Central    –   2.2    –    0.7    – 29.0*   2.7    –    –    –   34.6
South Western    –    –    –    –    –   0.1 39.5*   0.6    –    –   40.2
Thameslink  GN   1.9   1.2 11.6    –   7.3   4.1    –    –    –    –   26.1
Trans Pennine    –    –   9.5    8.5    –    –    –    –    –   1.4   19.5
Wales & Borders    –    –    –    3.8    –    –    –   0.2 19.5*    –   23.5
West Coast    –    –    – 31.8*    –    –    –    –   0.6   3.1   35.5
West Midlands    –    –    –  23.2    –    –    –   1.1   0.2    –   24.5
London Overground   4.7   0.4    –    1.2    –   1.5   0.1    –    –    –     7.8
Merseyrail    –    –    –    6.6    –    –    –    –    –    –     6.6
ScotRail    –    –     –    0.8    –    –    –    –    – 46.5*   47.3
 
Total train km (million) 50.0 35.2 75.6 118.1 27.5 35.7 47.1 45.5 24.6 55.5 514.8

Source: ORR GB Rail Industry Financials Information 2014-15. (London Overground, Merseyrail and ScotRail are franchised by TfL, Merseytravel and Transport Scotland respectively).

Although Network Rail has devolved the number of routes from 10 to 8 – by combining East Midlands with LNE, and Kent and Sussex to form South East – its regulatory accounts still operate on a 10 route system.

The analysis also shows that in eight out of the ten operating routes the dominant train operator accounts for at least more than 50% of  train mileage (denoted by an asterisk in the above table). But this is not the case with the two largest routes – London North Western (LNW) and London North Eastern (LNE) – which when combined account for more than a third of all national train mileage.

13 TOCs operate on the LNW route, more than twice the number found elsewhere. The dominant LNW operator is Virgin Trains with around one quarter of the route train mileage. On the LNE  the main operator is Northern (not VirginTrains East Coast, please note) with around one third of the route train mileage.

This mismatch between the NR operating routes and some of the franchise areas could pose problems for setting up integrated operating teams; especially when the traffic flows are intermingled and not self-contained.

This begs the obvious question: If Network Rail had problems with integrated operations on more ‘homogenous’ routes like Wessex (where SWT operates 84% of the train mileage), and now in Scotland (where Abellio ScotRail has a similar share), then what can be expected when the concept is applied to the two main routes – the LNW and LNE – which will be far more complex undertakings to manage?

Finally, maybe other options should be considered apart from those on the table. Smaller franchises and more open access, perhaps. That could make the railway more responsive to passenger needs, and may be less costly, complex and disruptive to implement. Unfortunately the trend seems to be moving in the opposite direction. Micro-franchising appears to be out, but mega-franchising is in although that causes mega problems as well, as even the DfT has now conceded.

Singing from the same song sheet is a fine thing but it only works when everyone sings in tune.

Trains from five different operating companies meet at Manchester Piccadilly.

JH

 

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