Revenue threat on East Coast Main Line

NEW open access services on the East Coast Main Line have been approved by the Office of Rail and Road, but a warning has been sounded that Virgin Trains East Coast's revenue could come under pressure as a result.

FirstGroup has succeeded in its bid to run trains between London and Edinburgh, with firm rights from May 2021. First was one of the runners-up in the 2014 competition to run the main intercity franchise on the route, which was won by a 90/10 consortium of Stagecoach Group and Virgin Trains and began in March last year.

Virgin Trains East Coast has also gained permission from the ORR to run additional services, but an application from GNER, part of Alliance Rail Holdings, was refused. Alliance said it was naturally disappointed, but also "pleased however that the ORR has recognised the benefits that further competition will bring, and we will re-visit our applications and continue to develop new proposals".

The new services will be introduced gradually, as capacity becomes available for additional paths following upgrades by Network Rail.

John Larkinson, the ORR’s director of railway markets and economics, said: “These new train services will give passengers more choice on services to Edinburgh and London and provide more frequent trains to towns and cities which are not so well served by rail today.

“We thank all the applicants, Network Rail and other participants for their thorough input and engagement throughout this process.

“Our decision has been informed by extensive analysis, formal industry hearings and detailed engagement with all parties. We have carefully weighed up the potential passenger benefits and the financial impacts on existing operators and the government, as we are required to do by law."

Stagecoach Group said there would be new Virgin Trains East Coast services between London and Edinburgh, Harrogate, Lincoln and Middlesbrough. These services formed part of VTEC's bid for the franchise, which started in March 2015 and is planned to run until at least 31 March 2023.

VTEC's core existing timetable has been approved from December 2017 when the current access contract expires.  VTEC has now been gained firm rights for service extensions to Bradford, Lincoln and Harrogate from May 2019, and for Edinburgh and Middlesbrough from May 2021. Should capacity become available more quickly, VTEC’s additional rights for service extensions to Edinburgh could start from May 2019.

Meanwhile FirstGroup’s East Coast Trains Limited will now begin operating five trains a day each way between London King’s Cross and Edinburgh via Stevenage, Newcastle and Morpeth from 2021. First is promising that 'passengers will benefit from an average fare of less than £25, free Wi-Fi and on-board catering, all offered in one high-quality class of travel'.

First chief executive Tim O'Toole said: "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."

However, Stagecoach warned that there could be financial consequences for the VTEC franchise when First launches its competing services.

Stagecoach chief executive Martin Griffiths said: “With respect to the decision on open access between London and Edinburgh, we do not believe the granting of these services within a franchised system and without a level playing field is in the best interests of passengers, taxpayers or communities.

“We will assess the ORR decision and implications in detail and review our options.”

There is a long and sometimes turbulent history of open access on the East Coast route which goes back to the beginning of this century, when Hull Trains began operations. The entrance of Grand Central in 2007 was preceded by a major dispute between the main franchise holder GNER and the ORR. GNER, which was owned by Sea Containers, lost its case after pressing for judicial review of the rail regulator's decision to grant open access to Grand Central and surrendered its franchise at the end of 2006, although it continued to run services for almost another year.

Making the withdrawal announcement in December 2006, Sea Containers CEO Bob Mackenzie said: "Our original bid was bullish, but we were knocked sideways by the July 2005 bombings, the hike in electricity prices and regulatory approval for Grand Central, which will compete for our passengers calling at our stations on the same line, but will not have the same charges imposed upon them."

GNER's successor National Express also failed to stay the course, and the franchise was placed in public ownership in 2009 until VTEC took over last year. The situation remains fluid, although Stagecoach has denied recent fears, voiced by the RMT, that the East Coast franchise is losing money.

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