Posted 16th March 2020 | 2 Comments

Coronavirus adds pressure to franchise finances

Updated 11.20

TALKS are reported to be underway between train operators and the Department for Transport about the effects of the coronavirus outbreak on passenger revenue.

Franchise finances are already frail, with the future of South Western Railway in particular doubt. The DfT is also believed to have been negotiating franchise extensions with FirstGroup for Great Western Railway, and with Govia for Southeastern, but so far without apparent result. As things stand, both contracts are due to terminate at the end of this month.

Apart from adjusting premium obligations, the possibility of reducing the number of trains on some lines is also said to be under consideration.

Increasing concern about the virus is reported to have dented passenger numbers by almost a fifth on some routes in recent weeks, as more commuters decide to work from home when they can, while Transport for London has confirmed that its passenger numbers have been dropping. It has estimated that the coronavirus could cost up to £500 million in lost revenue.

The Rail Delivery Group has neither confirmed nor denied the reports of talks, saying: ‘Train companies are regularly in discussions with the government about a range of things that affect the railway.

‘Our primary focus during the coronavirus outbreak is to keep our passengers and our people safe, and the country moving. While the government is not advising people to avoid public transport, unless they are showing symptoms of coronavirus, and rail companies are enhancing their cleaning on trains and at stations, we are seeing fewer people choosing to travel.’

Transport for London has confirmed that passenger numbers have been falling on its routes since October last year.

It continued: ‘Since then, a growing number of firms and individuals have changed their travel behaviour, with greater numbers of people working from home. This has led to an acceleration in the reduction in passenger numbers in the last week to around 19 per cent on the Tube and 10 per cent on buses compared to the same week the previous year.

’This is made up roughly equally of fewer people travelling and those travelling making fewer journeys.’

TfL said the main causes appeared to be a ‘significant reduction’ in the number of people visiting London, coupled with firms asking their staff to work from home, and a ‘continued underlying softness of demand’, particularly outside the peaks. TfL added: ‘This is likely to relate to consumers remaining cautious about their expenditure given the subdued economy and now the impact of Covid-19.’

The Department for Transport has been quoted as saying: ‘We recognise how difficult the current situation is for the transport sector and, across government, we are engaging with the sector's leadership to support workers, businesses and passengers.’

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • david c smith, Bletchley

    Yes, the "essential monopoly public services" ( with their captive markets) really do need public control ; I hope this doesn't mean nationalisation, though , as Whitehall is far too remote from the stakeholders. Personally, I'd prefer some form of local, direct democracy to be in charge here.

    There are, though other rail sectors , such as intercity passenger and rail freight that seem obvious candidates for commercial, on rail competition.

    With such "horses for courses" , intercity and freight companies could be allowed to fail, with their competitors ( rail, road , air) able to expand into any gaps. Natural monopoly operations (mainly commuter), though, would need access to the "public purse" in order that essential service is maintained.

  • Dan Conquer, Woking

    This crisis could, certainly should, be the nail in the coffin of the entire rotten franchising system. Private companies ought to know better than most that the value of an investment may go down as well as up, often for entirely uncontrollable reasons. Yet more bailouts for doing something most governments around the world have proven themselves best placed to do would be to throw good money after bad. Let the TOC's drain their shareholders cash, exactly as we were promised at privatisation would happen if they failed, or else let the state resume its rightful place in the delivery of essential, monopoly public services. Enough is enough!

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