Noble Lord cuts off nose to spite face?

Telegrammed by Ithuriel
According to Lord Adonis:

In determining the future of the C2C and NXEA franchises, my overriding concern has been to minimise disruption to passengers and staff, and cost to the taxpayer, while ensuring that train companies stand by their commitments. I judge these objectives are best served by:

• Terminating NXEA’s franchise in 2011, causing them to forego three years of profit; and

• Beginning the refranchising process immediately so that a new operator is in place in early 2011.

Since NXEA is receiving revenue support under cap and collar, which for 2008-09 was double this year's subsidy, future profitability is, at best, unclear.

Subsidy rises dramatically to £23 million in 2010-11 and £41 million in 2011-12 but this is because NXEA is managing the acquisition of 30 new four car Electrostars and the transfer of 17 Class 321s to increase capacity. The extra subsidy is to pay for extra lease rentals, depot upgrades and other associated infrastructure work.

According to the Lib Dems NXEA is a 'lame duck franchise' and should be terminated immediately.

That would do wonders for the team procuring £155 million of new trains.

On the other hand, the Old Leftie has cleared the decks for the NatEx rights issue.

Eye remains to be convinced that this is either a good thing for the squashed NXEA commuter or the tax payer.

NatEx counts its blessings as East Anglia franchise ends 'early'.

Much excitement from the Chatterati over the 'news' that National Express is to lose its remaining rail franchises.

This, for instance, from The Times...

National Express is to be stripped of its remaining rail franchise three years early, leaving the troubled transport company with just its bus business.

The Department for Transport (DfT) said today that it was terminating National Express’s East Anglia franchise after a decision to nationalise its East Coast main line rail service this year.

First point to make - this is not the application of Cross Default as promised by the Noble Lord during his slightly excitable interview with the Today Programme on the 1st July.

As pointed out by The Archer on Tuesday...

Sources suggest that the late change in the handback date of NXEC, from December 09 to November 09, means that NXEA will now fail the good behavior test so DfT can appoint a new franchised operator on this route in 2011 rather than 2014, so a sort of cross default half-way house.

However, as the franchise payments agreed between NXEA and SRA were very back-end loaded, what the lack of extension of the franchise could actually mean is upwards of £200m that NX won’t now have to pay to DfT so I can’t image NX would be too disappointed to lose the extension.

And to further complicate matters, there’s the small matter of 120 new EMU vehicles that are due to be delivered to the Greater Anglia franchise “between March and May 2011”.

So we have a manufacturer (Bombardier) that has developed something of a reputation for late delivery, a ROSCO - Lloyds TSB General Leasing (No. 8) Limited - that has never procured new trains before and a TOC (National Express) that is about to lose its franchise and be expelled from the railway industry.

A recipe for success this does not make.

Eye wonders if DafT has really thought this out?

UPDATE: This from our man at 222 Marylebone Road...

Send in the clowns!

The theme of this year's Railway Children Ball is Circus Acts.

Should be a walk over for DfT Rail then.

No Cross Default - Official... almost

Nothing yet on the DfT website but according to the RMT...

The government have also failed to trigger the cross-default clauses on National Express’s C2C service with that franchise being allowed to run its course until retendering and re-letting in November 2011.

No shit Sherlock.

UPDATE: This from The Archer...

RMT’s comments about c2c are more interesting for what they don’t say than for what they do.

The c2c franchise is due to expire in 2011 so an early termination now wouldn’t see a new franchised operator in place before then anyway, as per the current East Coast re-letting timetable.

RMT don’t however mention NXEA and here the franchise is due to run until at least 2011, with a potential extension to 2014 for good behavior.

Sources suggest that the late change in the handback date of NXEC, from December 09 to November 09, means that NXEA will now fail the good behavior test so DfT can appoint a new franchised operator on this route in 2011 rather than 2014, so a sort of cross default half-way house.

However, as the franchise payments agreed between NXEA and SRA were very back-end loaded, what the lack of extension of the franchise could actually mean is upwards of £200m that NX won’t now have to pay to DfT so I can’t image NX would be too disappointed to lose the extension.

NatEx at sea as "no steer" on Cross Default intentions

This from Bloomburg...

National Express Finance Director Jez Maiden said the government has given “no steer” as to whether it will rescind the company’s East Anglia and C2C commuter-train franchises.

As National Express today launched a 7 for 3 Rights Issue in an attempt to raise £360m this isn't exactly proving helpful to the struggling company.

Perhaps DafT and Lord Adonis should clarify their position?

UPDATE: Suggestions in the City that Spanish state operator RENFE is keen to enter the UK rail sector.

UPDATE: This from a Mr Saltaire...

That’s a good ruse to bump up the NatEx share price!

Cross Default update

Shouldn't something be happening soon?

'Nuff said.

UPDATE: This from Leo Pink...

I see that the LibDems have now also joined the clamour for NatEx to be stripped off their other franchises.

National Express East Anglia is currently responsible for procuring 30 four car Electrostar EMUs and is already on the maximum support under cap and collar.

Do we really want this dumped on the taxpayer?

National Express update

Looks like the wheels have come off the Cosmen CVC deal and with it Stagecoach's rescue of the C2C and NXEA franchises.

Whilst this leaves National Express in the brown stuff it may prove even more embarrassing for the Noble Lord.

City lawyers are rumoured to be dusting off wheelbarrows in the expectation of huge fees for sorting out Cross Default.

UPDATE: This from Leo Pink...

So that's 'rescued' as in 'Blackbeard the Pirate' rescued' the passengers on passing merchant ships?

See also 'liberated' as in my dad 'liberated' the Iron Cross in my medal collection.

UPDATE: This from Ithuriel...

So does this mean that wee Brian's court battle against the Department of Dogs' Breakfasts over the timing of cap and collar, the delays to ITSO smartcards and compensation for the missing £200 million is on again?

Will the lawyers have enough wheelbarrows to go round?

Stagecoach rattles the bucket

Good news for East Midlands Trains passengers!

This from the Independent...

Some rail passengers will have to fork out for fare rises of up to 145 per cent from next week.

The East Midlands Trains company is making alterations to some of its Travelcard tickets which will affect passengers travelling in the morning from Market Harborough, Kettering and Wellingborough to London.

Presumably Stagecoach supremo Brian Souter needs all the pennies he can get if he is to buy the rail and bus businesses of the doomed National Express Group.

Meanwhile, don't expect DafT to kick up a fuss over EMT's swinging fare increases.

If Souter can raise the necessary gee-gaws to buy C2C and NXEA it will save DafT the public humiliation of testing Cross Default in court.

Happy days!

NXEA has something on its mind

National Express are obviously taking Lord Adonis' threat to strip them of all their franchises very seriously.

At least so it would appear, judging from this page on the National Express East Anglia website.


But with NatEx gone, frustrated East Anglian rail travellers may have one less thing on their mind...

A bowler tip to the Samaritans whose website is here.

Legal advice on Cross Default "privileged and confidential"

Eye wonders if the Noble Lord is beginning to rue his cocksure assertion that NatEx will loose all its franchises?

This written answer given on the 13th July (and just for Doubting Sim here's the source)

Stephen Hammond (Shadow Minister, Transport; Wimbledon, Conservative):
To ask the Minister of State, Department for Transport
(1) what legal advice he has received with regard to cross default provisions in rail franchise contracts;
(2) if he will publish any legal advice he has received with regard to cross default provisions in rail franchise contracts.

Chris Mole (Parliamentary Under-Secretary, Department for Transport; Ipswich, Labour):
Legal advice on the issue of cross default in the context of the franchise agreement is privileged and confidential; therefore, it will not be published or divulged.

This has all the makings of a Mottram Moment!

NatEx,Cross Default and another broken promise?

This from Crow Bar Bob over at the RMT...

“Both Andrew Adonis, and Geoff Hoon before him, made it quite clear to RMT that if National Express defaulted on the East Coast they would be stripped of the c2c and East Anglia franchises and that there would be no reward for failure. We are calling on the government to stand firm, to get this company off our tracks and to seize the opportunity to begin a long-term programme of renationalising the railways.”

Perhaps My Lord Adonis and Geoff Hoon of that Ilk should have looked at the contracts a little more closely before making promises they can't keep.

Badly advised?

Telegrammed by The Archer
National Express seem very confident that their other franchises aren't at risk, under the Cross Default provisions.

Is this the same confidence that was exhibited when they signed the East Coast franchise all those years ago?

Perhaps time to return to the wise words of one Richard Bowker, as recorded by the The Daily Telegraph on 15th August 2007...

"We have had a very simple bidding philosophy,'' said Mr Bowker. ''We will not bid at levels we think are unsustainable or undeliverable - there's no point in being a hero for a day and a villain forever more afterwards."

Perhaps they have taken on new advisors?