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.