Competition is seen as key for driving rail efficiencies – both between the train companies themselves and with the airborne alternative. Dave Richardson reports
THE DEBACLE surrounding the renewal of the West Coast rail franchise last year has raised lots of questions, but meanwhile corporate travel demands for genuine competition between train operating companies are falling on deaf ears. The government review of franchising now underway means several franchise renewals have been put on hold, and operators including First Great Western, East Midlands Trains and Cross Country will continue for a few more years longer than expected.
Virgin Trains, which was about to lose the West Coast franchise to First Group before mounting a legal challenge, will now carry on operating the key business routes from London to the Midlands, North West and Scotland until at least 2017. The East Coast franchise, back in the public sector since National Express defaulted on its commitment in 2009, is due to be back in private hands by February 2015.
A return to shorter franchises is likely, after the Department for Transport (DFT) admitted getting its calculations wrong when vetting applications to run West Coast for a 14-year period. Shorter franchises mean that poorly performing operators can soon be shown the door, but the fear is that train operators will not be keen to invest in a short time frame.
ROUTE RIVALS
The Guild of Travel Management Companies (GTMC) – which recorded a 2 per cent year-on-year increase in rail transactions by members for the first half of 2013 – would like to see train operators competing on the same routes, as with airlines. But even on routes such as London to Birmingham, where Chiltern Railways is trying to win business from Virgin, the two operators use different stations and different routes.
GTMC chief executive Paul Wait says: “Direct competition would ensure that franchises remained committed to reasonable pricing, customer service levels and product enhancement. Without this same-route competition, it’s too easy to fall into a ‘comfort zone’ mind-set, knowing that the threat of losing the franchise is years away.
“The business traveller would benefit from creative pricing techniques aimed at attracting more first class travellers at an affordable price, and addressing the current issues of overcrowding in standard class while first class is partly empty. More competition might encourage some operators to rebrand first class to business class, and encourage more travellers to convert from car to rail.”
He adds: “Some people already think a return to the air is likely as demand increases, because it has become more affordable. If that were to happen, the rail industry will have lost a big opportunity.”
But a DFT spokesman confirmed there is no possibility of allowing more than one main operator on a route, the main constraint being capacity. The franchising system has been designed to offer exclusivity, although on a few routes one operator may offer fast services while another operates stopping trains – such as Virgin Trains and London Midland from Euston to Birmingham and Crewe. On a few other routes, two franchises overlap, such as York to Edinburgh, where East Coast and Cross Country operate side-by-side.
INCREASING INNOVATION
Capita Travel and Events is the largest booker of rail travel, and head of rail Raj Sachdave agrees more innovation is required. He welcomes developments such as Chiltern Railways’ Business Zone, offering free wifi and space to work at a much lower cost than Virgin’s first class fares, but with no meals included.
“The introduction of business class would be welcome, as the first thing on a corporate traveller’s wish list is a better working environment,” he says. “Many corporate travellers are simply not allowed to book first class, and it is a challenge to work comfortably and securely in standard class on many routes. It’s not easy for train operators to refurbish whole fleets to offer a mid-range product, but as new trains are on order for some routes, we hope business class will be looked at.”
Chiltern’s Business Zone is now available on 11 trains a day between Birmingham and London, including most peak-hour departures in each direction. Business relationship manager John Davidson says: “Load factors in Business Zone have really picked up this year. It works so well on airlines and has really got people’s attention.”
The DFT has ordered 122 new trains to be built in the UK by Japanese group Hitachi, to be used on the East Coast route from London King’s Cross, and the Great Western route from London’s Paddington – which is soon to be electrified as far as Oxford, Bristol and Swansea. These new trains will be mainly electric, but with a bimodal version to reach places not on the electrified network such as Aberdeen and Worcester.
UPGRADED TRAVEL
Capita would also like to see the wider availability of fares such as East Coast’s Scottish Executive ticket, which is booked in standard class but automatically upgraded to first class – thus circumventing travel policy that mandates the use of standard class. “The corporate traveller wants to see innovation, and some kind of rewards scheme as operated by airlines,” says Sachdave. “The mind-set of the corporate is now on the whole trip and not just the ticket price, and we are working on deals to include station car parking, ground transportation from the station, access to wifi in standard class and refreshment vouchers.”
Availability of wifi is a major reason why many corporates have switched from car or air to rail, as travellers can be far more productive during their journeys. But while it is available (and included in first class fares) on operators including Virgin Trains, East Coast, East Midlands Trains and Cross Country, it is not available at all on many routes or only available on a very limited number of trains, as with First Great Western. Catering provision also varies widely. Meals and drinks are included in first class on Virgin and East Coast – on East Midlands Trains and First Great Western, you have to pay.
DOMINANT SHARE
Modal shift from air or car to rail is what operators really want to see, and on routes where air and rail compete, train operators are eating into the airlines’ share. Rail dominates the Manchester-London and Leeds-London markets, with British Airways flying these routes mainly for the benefit of connecting passengers. On Newcastle-London, East Coast now claims a 66 per cent share compared to airlines’ 34 per cent – but the real opportunity is to increase rail’s share on Anglo-Scottish routes.
East Coast now has a 24 per cent share on Edinburgh-London traffic, while Virgin Trains claims a 24 per cent share between Glasgow and London. Although most rail passengers on these routes are travelling for leisure, both operators can appeal to business travellers with journey times of under 4h 30min from city centre to city centre, with wifi on board and competitive fares.
East Coast head of revenue Suzanne Donnelly says: “We are seeing double-digit growth in passengers on London-Edinburgh, and will increase our share further as we get more capacity. We have a close working relationship with major corporates, including Royal Bank of Scotland, which has doubled its spend with us. There may be a mind-set that three hours is the maximum time corporate travellers want to spend on a train, but they don’t always consider productivity.”
Virgin has increased the London-Glasgow service to hourly, and from December it is upping capacity on the Birmingham-Glasgow/Edinburgh routes with an extra 3,300 seats a day, with most trains also serving Birmingham International (for the airport) and Coventry. “We have agreed to form a partnership with Transport Scotland to examine the possibility of running non-stop London-Glasgow services, to get the journey time below four hours, with 2016 a realistic option for its introduction,” says a Virgin spokesman. “Progressive journey time improvements and frequency enhancements in the last seven years have seen our share of the rail/air market increase from 16 per cent to 24 per cent. If we can crack the four hours barrier, we believe a 50 per cent share is realistic.”
UP TO SPEED
With massive public investment in the rail infrastructure – including the electrification of more core routes bringing faster, greener trains – the future for rail travel looks bright, even before the High Speed Two (HS2) route is built from London to Birmingham (2026) and on to Leeds and Manchester (2032). But the GTMC’s warning that corporates could drift back to air must be heeded, and improvements to booking systems are necessary.
Corporates want to see wider deployment of e-ticketing across the entire rail system, which could be built into new franchise agreements. But the day when rail travel is as easy to book and ticket as air travel is still a long way off. Click Travel managing director Simon Mclean says: “There must be a commitment across the board to supporting future ticketing mechanisms such as self-print and smart cards. There must also be a commitment to transparent pricing, as train operators work around the rules by offering discounts on their own websites.”
Ian Cairns, head of distribution for thetrainline.com, says business passengers still face an era of austerity, needing to work productively at a time when fares and overcrowding are both increasing. “Essentially, they are looking for a more efficient rail system with more consistency in what’s offered, wifi being one example,” he says. “They want the consistency of a service they can rely on for years to come, and the Virgin West Coast situation showed that operators can build customer loyalty.”
He adds: “We are frustrated by delays in the franchising process, but we hope this will lead to a clearer path going forward.”