National Express is in far deeper trouble with its East Coast franchise than even I thought. Sources within the industry suggest that as much as 30 per cent of its first class business has disappeared and since the company will have to fork out £50m in premium payments in the year starting in April, compared with receiving a small subsidy this year, it is difficult to see how it can survive in its present form.
Moreover, nearly 20 per cent of their shares are held by the Spanish Cosmen family who are tipped to mount a takeover bid. If this happens, clearly they would not be interested in retaining the loss making franchises and would be prepared to sacrifice the other two – the poor performing East Anglia and probably the profitable C2C – to get themselves out of the rail business. And presumably the first person to be shown the exit door will be one Richard Bowker who has a rather accident prone career, having seen one organisation, the Strategic Rail Authority, abolished under him and another, Building Schools for the Future get massively behind in its capital programme.
Incidentally, watch the Office for Rail Regulation’s figures due out on Wednesday.They will show that the number of passenges travelling on season ticket fell in the third quarter of this year by just under one per cent compared with last year, a prelude, I suspect to much bigger falls this time. The chickens are coming home to roost for the franchises and it is ministers who will have to cope with the fall out..
If National Express goes to the government, it will not get more money but it may be allowed to go over to a management contract. But if that happens, there will be queue at the door for similar arrangements from the other franchisees. That will mean the effective collapse of the franchising system. Clearly new franchises will no longer be able to be let on the basis of private companies taking the revenue risk, which negates much of the point of the whole system. As I have written several times already, 2009 is going to be the most eventful year in the rail industry since privatisation.