Passenger Transport

LA IS UNC SU H E

ISSUE 001 04 MARCH 2011

NEWS, VIEWS AND ANALYSIS FOR A SECTOR ON THE MOVE

Meet the transformers

David Higgins and Giles Fearnley settle into new roles which see them tasked with transforming the culture of two of the country’s largest transport companies

David Higgins and Giles Fearnley have each been handed the challenge of leading culture change at large passenger transport organisations that are regarded as under-achievers Network Rail and FirstGroup’s NEWS

UK bus division. In this launch issue of Passenger Transport we offer unique insights into these challenges, and how they are now starting to address them.

Higgins took charge at Network Rail on February 1 and pledged INVESTMENT

to make the rail infrastructure controller more attuned to the needs of its customers.

“I also want people to associate these words with Network Rail: Open. Transparent. Accountable.

Responsive,” he added.

Meanwhile, Fearnley spoke exclusively to Passenger Transport this week, explaining why he took the top job at FirstGroup’s 9,000-vehicle bus division, and his plans for the future.

INSIDE TRACK

TRAVEL TEST

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Green light for IEP and electrification

£70m Arriva order boosts bus builders

Rail patronage shrugs off the recession

Cardiff Bus is delivering a capital service

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Hammond go-ahead for Welsh route

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More than 400 buses to enter fleet in 2011

Growth has resumed and is powering ahead

Welsh bus company passes our test

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CONTENTS

PASSENGER TRANSPORT Adelaide Wharf, 21 Whiston Road London E2 8EX 020 7749 6909 editorial@passengertransport.co.uk

Separated at birth? Two men with a lot in common Bald and bespectacled, they were both born in the same year, 1954. On first sighting you could be forgiven for mixing them up, but it’s not just physical appearance that David Higgins and Giles Fearnley share. Each can look back on a sparkling Robert Jack career, and each faces a daunting new challenge.

Managing Editor Higgins, an Australian, headed Lend Lease, the international property and construction company, when its projects included the Olympic Park for the 2000 Sydney Games and the Bluewater retail complex in Kent. He has spent the past four years leading the Olympic Delivery Authority. Fearnley, who began his career as an accounts clerk in his home town of Sheffield, became one of the most successful entrepreneurs to emerge from the privatisation of the UK’s bus and rail industries - building up and then selling on train group Prism Rail and bus group Blazefield.

Higgins and Fearnley are now settling into their new roles as the respective leaders of Network Rail, the rail infrastructure controller, and First UK Bus, the country’s largest bus operator. Both operations play a central role in UK passenger transport and employ tens of thousands of people - but both organisations suffer from too much central control, a lack of entrepreneurial flair and a failure to win friends. Higgins and Fearnley will need to draw on all of their undoubted charm and commercial nous to get the best out of these sleeping giants. If they succeed, a place in history awaits them.

HAVE YOUR SAY Contact us with your news, views and opinion at: editorial@passengertransport.co.uk PASSENGER TRANSPORT editorial@passengertransport.co.uk forename.surname@ passengertransport.co.uk Telephone: 020 7749 6909

Telephone (all enquiries): 020 7749 6909 EDITORIAL editorial@passengertransport.co.uk ADVERTISING ads@passengertransport.co.uk Managing Editor & Publisher SUBSCRIPTIONS Robert Jack subs@passengertransport.co.uk Deputy Editor Andrew Garnett ACCOUNTS Directors Chris Cheek, George Muir, accounts@passengertransport.co.uk John Nelson, Stuart Wilde Sales Manager David Crawford Passenger Transport is only available Studio Natalie Clarke by subscription. Subscription rates per year; UK £140 (despatch by OFFICE CONTACT DETAILS first class post); Europe/Eire £220; Publishing Transport Publishing Ltd Worldwide (airmail) £280 Adelaide Wharf, 21 Whiston Road London E2 8EX The editor welcomes written UNITED KINGDOM contributions and photographs,

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which should be sent to the above address. All rights reserved. No part of this publication may be reproduced in whole or in part without the publisher’s written permission.

Printed by Cambrian Printers Ltd, Llanbadarn Road, Aberystwyth, Ceredigion SY23 3TN © Passenger Transport Publishing Ltd 2011 ISSN 2046-3278 SUBSCRIPTIONS HOTLINE 020 7749 6909

IN THIS ISSUE 24

A VERY COLD WINTER FOR DEUTSCHE BAHN

08

EXTENT OF BUS SERVICE CUTS THREAT REVEALED

Deutsche Bahn is a major player in the UK passenger transport market, following its acquisition of Arriva last year. George Muir considers the pressures that DB and its chief executive, Rüdiger Grube (pictured), are facing at home in Germany.

07

A NEW ‘POACHER TURNED GAMEKEEPER’ JOINS TFL

09

NEG SEEKS HIGHER BUS PROFIT MARGINS

Leon Daniels is leaving FirstGroup’s UK bus division, where he was customer service and communications director.

He is the latest “poacher turned gamekeeper” from the private sector to join Transport for London as managing director, surface transport.

National Express Group has published its full year financial results for the year to December 31, 2010. In a presentation to the City, chief executive Dean Finch explained how he is seeking margin improvement at the group’s UK bus business.

14

ARRIVA LOSES £8.4M ON CROSS COUNTRY

27

HOMER’S ODYSSEY: SETTLING IN AT THE DFT

Analysis on company financial performance reveals losses at Arriva’s Cross Country franchise, resulting from falling passenger volumes.

Meanwhile, bus company First West Yorkshire maintains profits after slashing at workforce by 200.

Our Westminster insider imagines the private thoughts of the department’s new permanent secretary, Lin Homer, including: “One thing is clear to me already. Transport is a mightily complicated brief - far more so than most give credit for.”

The Association of Transport Coordinating Officers has published a new survey which provides a national picture of the scale of cuts to local bus services that local authorities are preparing. Some are looking at withdrawing all supported routes.

10

HAMMOND LAUNCHES HS2 CONSULTATION

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BUS NETWORKS CAN SURVIVE SPENDING CUTS

Transport secretary Philip Hammond has announced a new consultation into proposals for the planned High Speed 2 rail link. “High speed rail offers us a once-in-a-generation opportunity to transform the way we travel,” he said.

Stuart Linn of Réseaulutions considers how to improve bus networks amid a backdrop of cuts.

“Even for more challenging areas, there would seem scope to avoid the worst effects of the cuts in public finance,” he concludes.

REGULARS NEWS INSIDE TRACK TRAVEL TEST COMMENT EVENTS CAREERS DIVERSIONS

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“We will address the challenges that face the provision of bus, rail and light rail services”

WELCOME

Robert Jack (left) and Andrew Garnett

OUR TEAM Our editorial team is actively supported by investors and directors who are key figures in the world of passenger transport. They offer unique insights into the management, business and political issues that affect the industry.

CHRIS CHEEK Chris has worked in the passenger transport industry for 38 years. He is a director of The TAS Partnership, the specialist public transport consultancy. He is also a director of Transport Events Group, organisers of the UK Bus Awards.

Welcome to the start of an exciting new journey

Welcome to the launch issue of Passenger Transport - a new frequent and high quality information service for a sector that is both vital and fast moving Welcome to the launch issue of Passenger Transport - a new magazine and website which will provide the UK passenger transport sector with frequent, high quality news and analysis.

This new fortnightly journal is the only UK magazine devoted to providing unrivalled news coverage across all our ground passenger transport modes providing a definitive fortnightly reference point for professionals and decision-makers alike.

In these pages we will address www.passengertransport.co.uk

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the challenges that face the provision of bus, rail and light rail services in the UK and will map out the future of their vital role in a changing society.

Pictured above, our editorial team of Robert Jack and Andrew Garnett has many years of experience of reporting on sector. They are supported by key figures in the world of passenger transport (see panel on right).

In the current economic environment it is more important than ever that this fast-moving

sector has a forum in which problems and solutions can be shared. Spending cuts threaten service provision across the country, but there is recognition that good transport links will play a crucial role in the economic recovery. Good quality information will help to ensure that the right decisions are made.

We hope that you will enjoy this new magazine and its website www.passengertransport.co.uk - and we look forward to your feedback. Let the journey begin!

GEORGE MUIR George is presently chairman of the Aberdeen University Transport Research Advisory Board. Previously, he was director general of the Association of Train Operating Companies from 1999 to 2008.

JOHN NELSON As chairman of First Class Partnerships, John specialises in the development of business strategy and managing change. He is currently serving on the advisory board established by Sir Roy McNulty’s value for money study of the UK rail industry STUART WILDE Stuart retired in 2008 from his post as managing director of bus operating group Blazefield Holdings, which he co-owned with Giles Fearnley from 1991 until it was sold to Transdev in 2006. He is a director of Transport Events Group.

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NEWS DAVID HIGGINS

GEORGE MUIR

COMMENT

A SPARKLING PERFORMANCE David Higgins, the new chief executive of Network Rail, looks like a lanky, grey faced tax accountant and no one recognised him when he waited in the corridor to appear before the Transport Select Committee.

He made all the necessary points: safety, punctuality, engaging with customers and suppliers, cost control, electrification and overhauls. But he got interesting when he talked about empowering the regions, while keeping the central control needed to make our complex railway work. The shift to the regions will be cautious.

But then, suddenly, he came alive. He positively sparkled about what the railway could do. “The Northern Hub is essential, it’s my first priority for 2014; it will give a 50% increase in passenger traffic; it has a 4:1 return on investment.”

Committee member John Leech, a Manchester MP, beamed.

HS2 is also essential. In 6-10 years the West Coast Mainline, like other routes, will be full. It will bring huge benefits. “Look at what good rail connections have done to prosperity and property prices,” he said. (If there is one thing property people like Higgins know, it’s location, location, location).

He sparkled about innovation and the talent of private operators; and he batted back the clichéd complaints about how things are better done elsewhere.

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Network Rail aspires to ‘entrepreneurial’ future David Higgins pledges to empower regional managing directors PARLIAMENT

Incoming Network Rail chief executive David Higgins outlined his mission to transform the rail infrastructure provider into a more entreprenurial-led business in his debut appearance before the parliamentary transport select committee, this week.

The former Olympic Delivery Authority chief said that the organisation needed to be “more entrepreneurial” and open to new ideas from both suppliers and customers.

“I’m looking to set up Network Rail for Control Period 5,” Higgins said. “We need to have a much more efficient, quicker, more agile organisation that works with our partners in a better way as the new franchises come into force.”

He also revealed more details

RAIL CAPACITY CRUNCH LOOMING

High Speed 2 is vital warns Network Rail chief HIGH SPEED RAIL

A new high speed rail route is a necessity for the UK to avoid a potential capacity crunch on the West Coast Main Line.

That was the message from new Network Rail chief executive David Higgins at his appearance before the parliamentary transport select committee this week. The previous day had seen transport secretary Philip Hammond launch a new Department for Transport

about how Network Rail will devolve power, with new route managing directors empowered to make decisions at a local level.

He continued: “These executives will run businesses, they won’t just run a cost centre.

“We’re starting with Scotland and Wessex and we’re doing that because they’re relatively self contained. They’re operating well and we have good partners in

David Higgins

consultation into plans for a new high speed rail route between London and Birmingham. Hammond argued that high speed rail offered a “once-in-a-generation opportunity” to transform the way Britain travels and would assist with economic regeneration.

In response to a committee question about whether additional capacity could be found on the WCML at the expense of building a new high speed route, Higgins said: “West Coast has been a tremendous success. The £10bn upgrade means that that franchise is seeing customer growth of over 10% per annum and at Christmas it was up by

those areas.”

Higgins described how Network Rail would become a “hybrid” organisation for around an 18-month period before the implementation of the new regional management regime across its business. “We need to make sure all our systems work,” he added.

However, he rejected the concept of vertical integration, describing how it would be impractical to implement across the majority of the UK’s network where a number passenger and freight operators interact on dense areas of the network.

He continued: “There are one or two areas where you can see the benefits of vertical integration, but across a large part of our network there’s a challenging role of integrating it.

“There’s many benefits that can be achieved by much closer alignment - the current structures are set up for conflict.”

20% year-on-year.

“But within 10 years - and probably six years - the route will be at absolute capacity and that’s with additional carriages.”

Higgins said that the rail industry could look at other tactical interventions to enhance capacity on the route, but in the end this was constrained by the limited number of trains that could be physically accommodated on tracks.

He concluded: “Forget about the speed. Think about capacity, because within six to 10 years West Coast will be full. Then the only way to cope with demand will be to push the prices up.” www.passengertransport.co.uk

02/03/2011 19:13

The challenges that face First UK bus. Page 22

GILES FEARNLEY NEWS

Giant bus order to back up First’s new ambition Giles Fearnley speaks about his first month as First’s UK bus MD BUSES

When FirstGroup’s new chief executive, Tim O’Toole, offered him the chance to lead FirstGroup’s UK bus division, Giles Fearnley leapt at the chance.

Some ask why would Fearnley, a successful transport entrepreneur who has amassed a multi-million fortune, would want the job. With a fleet of 9,000 vehicles, First is the UK’s largest bus operator, but in many areas it lags behind its peers in terms of both service quality and financial performance.

For Fearnley the answer is simple. “It’s the most exciting job in the UK bus sector,” he told Passenger Transport this week. “If I had turned it down I know that I would have always regretted it.”

He’s too diplomatic to criticise the record of his new employers, but reading between the lines it is clear that he sees the opportunity to breathe new life into a business where there is much room for improvement.

“I am very conscious that First is often criticised both nationally and locally in terms of its service delivery,” he says. “What matters is the future. I am absolutely convinced from what I have seen in the first month that we can up the service offer and deliver it to meet passenger expectations and grow the business. I am really excited to be leading this team.”

When Tim O’Toole succeeded Sir Moir Lockhead last Autumn, he quickly signalled a change in strategy for First’s UK bus division. He suggested that the www.passengertransport.co.uk

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Aberdeen-based group’s previous strategy of combating the recession by cutting mileage and raising fares may have gone too far. In the past two years, mileage has been cut by around 10%.

Other bus groups, like Stagecoach, responded to the recession by focusing their efforts to generate growth, and O’Toole wants First to do the same. He has also pledged more freedom for

“It’s the most exciting job in the UK bus sector” Giles Fearnley

First’s local bus businesses and less central control from Aberdeen.

O’Toole didn’t waste much time before talking to Fearnley, who was part-time chairman at the Confederation of Passenger Transport and a job offer soon followed. As the co-owner of Blazefield Group, which operates buses in Lancashire and Yorkshire, Fearnley headed a bus business that was characterised by high levels of growth and local control before selling to French group

Transdev in 2006. He clearly has the right credentials to lead First’s change in strategy and Fearnley says that O’Toole is giving him the freedom to make his own decisions (something which previous First UK bus MDs have not always enjoyed). O’Toole is also backing Fearnley with major new investment in vehicles - a symbol of the group’s ambition.

Fearnley revealed to Passenger Transport that First will announce “very substantial orders” for new buses later this month. The order will be for 2011 and 2012 - a twoyear order.

With freedom to act as he sees fit, those in involved in passenger transport will be watching closely how Fearnley makes his mark on the business with an annual turnover of more than £1bn.

Fearnley believes in local control: “I have always been convinced that bus networks and services are at their best where the focus of their planning and delivery is local,” he explains.

However, will this mean a return to local branding some areas?

Will we see First’s omnipresent pink and blue ‘Barbie’ livery replaced by the Badgers that preceded them in the West Country? “I honestly don’t know at this stage,” he responds.

“Nothing is ruled in, and nothing is ruled out. We’ll be having those debates internally in due course.”

There has also been speculation that Fearnley may look at selling off poor performing subsidiaries, something which went against Sir Moir Lockhead’s territorial instincts. Will he consider this?

“Yes,” says Fearnley, “but I am also considering acquisitions.”

RELIEF FOR UK’S BUS BUILDERS New investment brings end to spending freeze BUS MANUFACTURING

The announcement of a major order for new buses from FirstGroup later this month will provide further grounds for optimism for UK bus builders, and overseas suppliers.

UK-based Alexander Dennis, Optare and Wrightbus struggled to keep their production lines busy as bus operators froze their spending on new vehicles during the recession.

FirstGroup, the UK’s largest bus operator, operates a fleet of 9,000 vehicles in England, Scotland and Wales. It registered more than 500 buses in 2008, and a further 500 in 2009. However, last year saw the number of new buses registered by the group slump to 208 - of which most were for London. Fleet renewal outside of the capital was minimal.

Aside from the order for 133 Wrightbus double deckers on Volvo B9TL chassis announced at last Autumn’s Euro Bus Expo show at the Birmingham NEC, the last significant orders from FirstGroup for new buses were in 2008. These orders included a 1,000-vehicle order with Wrightbus, which was reduced by 200 as the recession began to bite.

UK bus manufacturers are now hopeful that a revival in orders will take place. Last month saw Arriva announce a £70m order for 419 new buses (see page 13 for details).

NEW BUSES REGISTERED BY FIRST Source: UK Bus Parc Database, TRI

573

549

208

2008

2009

2010

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02/03/2011 21:43

“I return to my London roots and am looking forward to this new challenge”Leon Daniels

ROUND-UP NEWS

A new ‘poacher turned gamekeeper’ joins TfL

PRIVATE SECTOR FUNDING MISSING

Daniels departs FirstGroup for surface transport role LONDON

Leon Daniels is the latest poacher-turned-gamekeeper to head Transport for London’s surface transport section.

It was one of the worst kept secrets in the industry but, on February 23, FirstGroup told staff that Daniels would leave the company’s UK bus division, where he was customer service and communications director, to join TfL as managing director, surface transport. He will begin his new role, which covers London’s 6,800 buses, the congestion charge, river services and roadworks, in April.

Speaking to Passenger Transport this week, Daniels said that although he was inspired by the plans that FirstGroup chief executive Tim O’Toole has for the business, he could not refuse the offer from TfL. Believing that he has one last big job in him, he explained: “This chance won’t come round for me again. I knew I would regret it if I didn’t take it.”

Daniels missed out on the surface transport role in 2000.

He was interviewed for the post but mayor Ken Livingstone appointed Peter Hendy, a

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friend and colleague of Daniels.

Livingstone referred to Hendy, who begin his career with London Transport before switching to the private sector, as his “poacherturned-gamekeeper” - a man who knew all of the tricks employed

by London’s private sector bus companies. In 2006, when Hendy was promoted to TfL’s top job, commissioner, the surface transport role was handed to another former poacher, David Brown, who had previously headed Go Ahead Group’s London bus operations.

With Brown now departing TfL to succeed Keith Ludeman as chief executive of Go Ahead, London’s new mayor, Boris

Leon Daniels

Johnson, has turned to Daniels, a third poacher-turned-gamekeeper from the private sector.

Daniels owned and ran London bus operator Capital Citybus before selling the company to FirstGroup in 1998. “Little did I know when Moir Lockhead asked me to stay six months, in July 1998, I would still be here over a decade later,” Daniels wrote on his blog last week. “Everyone rather assumed I would set up again with my close friends and colleagues.

“I am rather glad I didn’t.

I have had a most wonderful time at First looking after all of London and the south east, then as commercial director for the whole of UK and more recently as customer service and communications director.

“No greater moment was when my team won us the spectator transport contract for the London 2012 Olympic Games.”

Turning to his new challenge, Daniels wrote: “I started my career in what is now the Department of Transport but have spent over 30 years in the private sector. Having learned a considerable amount, largely the hard way, I go back to the public sector to pass it on. I return to my London roots and am looking forward to this new challenge.”

Taxpayer has paid £12bn shortfall in rail funding INVESTMENT

Capital expenditure in the rail industry is set to continue at substantial levels over the next 5-10 years, with work continuing on major projects for new lines such as CrossRail and High Speed Two as well as major plans for upgrading and electrifying the existing network.

This is the conclusion of a new report analysing investment in the industry from passenger transport specialists TAS. The report shows that, at today’s prices, over £4bn worth of investment has been put into the rail industry every year since 2001, of which the bulk has been on infrastructure upgrades and new lines such as the Channel Tunnel Rail Link. The country has invested an average of around £300m to £500m a year on new trains, and around £300m a year on upgrading stations.

The failure to attract private sector investment has cost the government around £12bn, the report notes.

The previous government’s 10-Year Plan had envisaged that £31bn of investment would have come from the private sector by now, but in fact TAS estimates that the total is less than £15bn. The taxpayer has made up the difference.

On rolling stock, the report identifies the need to spend over £12bn on new trains over the next 10-15 years.

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02/03/2011 19:44

NEWS ROUND-UP REAL TIME INFO COULD BE AXED Lancashire scraps RTPI as PTE seeks to save free bus FUNDING

Real time information for bus users looks set to be one of the victims of local authority cuts to public transport provision with the news that Lancashire County Council is looking at taking the axe to its system in order to balance its budget.

The council has revealed that scrapping the county’s RTPI system and reducing printed bus stop information provision

“The decision really scuppers our investment” will produce annual savings of £275,000. The decision has frustrated local bus operator Transdev Burnley & Pendle.

Douglas Robertson, the operator’s business director, told Passenger Transport that he was anxious to not lose the benefits that the RTPI system produced.

“We’ve invested in the system on a commercial basis as we saw it as something that could only expand in the future,” he said.

“The decision really scuppers that investment, but we’re keen to discuss the issue with the council.”

Meanwhile, West Yorkshire PTE Metro is considering options for the Leeds FreeCityBus service after the city council withdrew funding following budget cuts.

One option being investigated by the PTE in order to continue the shuttle service is a single flat-fare.

“It may be possible to continue running a MetroCityBus service around a city centre loop without slowing it down too much and at no extra cost to Metro,” said Metro vice chair Ryk Downes.

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Extent of cuts to local bus routes is revealed More cuts are expected in 2012/13 as councils seek savings BUS CUTS

A new survey has found that a significant proportion of England’s councils are planning cuts of up to of 50% for the financial support of bus services in their areas over the next year.

The picture also looks bleak for the 2012/2013 financial year with over 30% of shire counties questioned suggesting that they will spend more than 50% less on local bus services.

The findings by the Association of Transport Coordinating Officers come amid growing concern that local bus services could be an easy target for cuts as local authorities seek to slash their budgets following reduced

CONCESSIONARY TOOL SHUNNED Introduction of DfT reimbursement is patchy CONCESSIONARY FARES

The Department for Transport’s guidance on calculating concessionary fare reimbursement in England is flawed and a one size fits all approach is not appropriate, according to the Association of Transport Coordinating Officers.

Following a period of consultation last year, the DfT announced draft guidance that aimed to reduce spending on concessionary bus travel in England with a new reimbursement calculator.

However, ATCO has found that both PTEs and unitary authorities expect to see their spending on

funding from central government.

Of the councils ATCO surveyed, 30% of shire counties will cut their budgets for supported bus services by up to 50%. A further 5% will cut their budgets by more than 50%. A number of councils, including Cambridgeshire, are looking to withdraw all tendered bus routes.

ATCO chair Bruce Thompson said that the cut in several sources of funding for local bus services inevitably means that discretionary spending by local

“A number of councils, including Cambridgeshire, are looking to withdraw all tendered routes” reimbursement to increase over the next year, while savings by England’s shire counties fall short of the 15% cut suggested by government.

One ATCO member revealed that they had instigated ‘fixed pot’ negotiations in order to mitigate the major bus service withdrawals that local operators suggested would occur following the introduction of the DfT’s calculator.

“The funding mechanism for concessionary fares is grossly flawed,” said Mark Pedlar, the chair of ATCO’s bus executive.

“You cannot distribute funds using a national formula when there are so many areas with different operating conditions. Without the payment of a special grant to rectify the serious under funding issues, there will always be a case.”

authorities on non-core services such as public transport are placed at higher risk.

He continued: “Many councils have been forced to completely review their public transport strategies to deliver immediate cash savings, in the knowledge that this will also undermine key policy aims of helping the economy, and offering alternatives to car travel.”

Meanwhile, the Campaign for Better Transport last week sent a letter to prime minister David Cameron, co-signed by a diverse range of organisations, urging him to protect funding for local bus networks. “Central government has a share of the responsibility for this situation and can play a role in avoiding the worst impacts of these cuts,” wrote CBT chief executive Stephen Joseph.”

STAGECOACH IN SCOTTISH INQUIRY Group faces TC Aitken in maintenance probe COMPLIANCE

Four Scottish Stagecoach subsidiaries appeared before traffic commissioner Joan Aitken this week at a public inquiry convened to answer allegations of improper maintenance.

Three subsidiaries which form Stagecoach’s East Scotland business, plus Stagecoach Glasgow, were called to a two-day public inquiry in Edinburgh. A spokeswoman for Aitken confirmed the allegations include wheel-loss incidents.

It is anticipated that Aitken will produce her written judgement and verdict on the case in due course. www.passengertransport.co.uk

02/03/2011 19:40

CrossCountry reveals loss of £8.4m Page 15

ROUND-UP NEWS

National Express aims for higher bus margins Fare rises possible as Finch reveals 28% increase in profits FINANCIALS

National Express Group is looking to boost the performance of its UK bus division in order to achieve industry-leading margins.

Last week NEG’s full year financial results for the year to December 31, 2010, showed that revenue fell 22% to £2.1bn, largely as a result of the handing back of the troubled East Coast rail franchise. However, operating profit grew by 28% to reach £204m. The results have enabled the group to restore the dividend, axed in 2009.

WEATHER HITS LONDON BUSES

Metrobus plunges in London bus league table PERFORMANCE

The latest London bus performance statistics obtained by Passenger Transport lift the lid on how December’s poor weather affected bus operations in the capital.

Operators with suburban routes in south and east London were particularly affected with Go Ahead subsidiary Metrobus falling 11 places in the table when compared to the previous period. It recorded an Excess Waiting Time variance of -0.07 minutes, in stark contrast to its previous variance figure of 0.44 minutes.

Topping the table is Arriva’s Wandsworth garage. The operation is part of the group’s London sightseeing operation and recorded an EWT variance of 0.74 minutes. www.passengertransport.co.uk

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Speaking to City analysts, chief executive Dean Finch said that there was scope to enhance margins at its UK business, particularly in the West Midlands where it is the dominant operator. “[In] PTE areas, some of the other businesses tend to enjoy higher margins than we do,” he explained. “We are the cheapest and there’s scope to do a lot of work on yields and fares.”

Finch contrasted the fare products of NEG’s Birmingham bus business with the pricing structure of other competing groups in PTE areas. There similar products are, on the whole, priced higher, suggesting that the group may be looking at

increasing fares in order to meet financial targets.

Dave Kaye, managing director of the UK bus division, added that there was a “real opportunity for growth”, with better marketing to boost high yield products.

Meanwhile, Andrew Chivers, managing director of the UK’s rail division said that NEG had “wiped the slate clean” with the Department for Transport on issues relating to the East Coast franchise. “We are back in the game in UK rail,” he said.

Chivers also confirmed the group would bid for the upcoming East Anglia franchise. “We will bid for suitable franchises as they arise,” he added.

London Buses Operator League Table Period 10: October 16, 2010 to January 7, 2011 EW Minimum Standard Operator (mins) Arriva Wandsworth 1.50 First London West 1.29 Arriva The Shires 0.97 Arriva London North 1.30 CT Plus 1.08 Arriva London South 1.24 Metroline 1.25 Blue Triangle 0.80 Selkent 1.25 London General 1.21 Network Average 1.23 London Sovereign 1.14 London Central 1.24 First London East 1.19 Metrobus 1.07 East London 1.20 Abellio London 1.14 London United 1.22 Arriva Kent Thameside 0.99 Docklands Buses 1.20

EWT Variance (mins) 0.76 0.31 0.23 0.19 0.18 0.17 0.17 0.10 0.06 0.06 0.06 0.04 0.02 0.00 -0.07 -0.09 -0.16 -0.19 -0.24 -0.38

Current Position 1 2 3 4 5 =6 =6 8 =9 =9 N/A 11 12 13 14 15 16 17 18 19

MORE DELAYS FOR CAMBS BUSWAY Cambridgeshire looks at appointing new contractor BUS RAPID TRANSIT

Cambridgeshire’s problem-beset guided busway project has moved closer to fruition with the news that contractor BAM Nuttall last week completed all major construction work on the project.

However, the opening date of the busway remains uncertain with the entire project now two years behind schedule. Further problems were revealed last week when councillors were told

“We take any date given by them for completion with a pinch of salt” that BAM Nuttall has failed to submit a number of mandatory construction and design certificates that would allow the busway to finally open.

“BAM have so far declined to make a commitment on dates,” a spokesman for the council told Passenger Transport. “It’s got to the stage now where we take any date given by them for completion with a pinch of salt.

“There are outstanding issues and we’re now at the point where we are looking at appointing a new contractor to undertake the remedial work. We want the route open as soon as possible, but we can’t get to that stage until we receive the certificates and rectify all the faults.”

BAM Nuttall has so far paid penalties totalling £9.5m for delays to the £116m project.

“We’ve a robust contract,” added the spokesman. “Overspends are simply the responsibility of the contractor.”

4 March 2011 | 9

02/03/2011 19:40

NEWS ROUND-UP

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IEP and electrification get Hammond approval Great Western route electrification gets the green light from DfT INVESTMENT

Plans for a new fleet of trains to replace the ageing High Speed Train fleet and further electrification of the Great Western Main Line have been approved by transport secretary Philip Hammond.

He said that the decision would bring “massive improvements to journey times, more seats and more reliable services”.

The ratification of the stalled Intercity Express Procurement project, which was suspended following the outcome of the general election in May last year, will now proceed. Agility Trains, the consortium made up of John Laing and Japanese manufacturer

RAIL EXTENSION OPENS EARLY

Hitachi that was awarded the IEP contract in 2009, will now resume work on the project.

Approval of IEP is believed to have followed months of strong lobbying of DfT officials by the Japanese government. With Hammond’s blessing now secured, Hitachi has confirmed plans for a new “European rolling stock manufacturing and assembly centre” at Newton Aycliffe in County Durham where the 500-vehicle IEP train fleet will be assembled.

However, changes to the IEP project will see greater train operator input into the specification developed for the trains, a move that seems in part tailored to dampen criticism of the project by TOCs. Meanwhile, Hammond’s confirmation of plans to electrify

the GWML between Cardiff, Bristol and Didcot restores the pre-election electrification proposals of his predecessor, Lord Adonis. Those plans were also put on ice last year, with partial electrification of the route between London Paddington, Didcot, Newbury and Oxford approved in November following the outcome of the Comprehensive Spending Review.

Further rail electrification in Wales is also a strong possibility.

Hammond revealed that there may be a strong high-level case for electrifying some of the Valley lines to the north of Cardiff.

“My department will now work with the Welsh Assembly Government to develop a business case for the electrification of the Cardiff Valley lines,” he added.

DFT LAUNCHES HS2 CONSULTATION Britain can’t afford to be left behind foreign rivals, says secretary of state HIGH SPEED RAIL

Transport secretary Philip Hammond has announced a new consultation into proposals for the planned High Speed 2 rail link and stated that the scheme would bring benefits in excess of its cost.

The secretary of state also warned that Britain’s transport network cannot afford to be left behind while competitor countries improve their transport infrastructure. “We must invest in Britain’s future. High speed rail offers us a once-in-a-generation opportunity to transform the way we travel in the 21st century and would help us build a modern economy fit for the future,” he said.

The government is proposing a Y-shaped network linking London, the West Midlands, Manchester and Leeds, with stations in South Yorkshire and the East Midlands, and links to existing lines.

The first trains await departure from Highbury & Islington on the new Overground extension

Crucial Overground link opens for business LONDON OVERGROUND

The latest phase in the creation of an orbital rail route in London has been completed with the opening this week of a 2km extension between Dalston Junction and Highbury & Islington.

The extension of the £1bn East London Railway, the core section of which opened last summer, opened three months early and allows connections with other Overgroundbranded services on the North London Line. The final link on the orbital route, between Surrey Quays and Clapham Junction, is expected to open in 2012.

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Hammond approves IEP project Page 10

Arriva places £70m bus order Announcement is a further sign that UK bus manufacturers are seeing the shoots of recovery CLIENT Arriva TOTAL INVESTMENT £70m in 419 buses for UK bus fleet MAIN SUPPLIERS Optare (70 buses) and Wrightbus (349 buses) OPTARE ORDER 13 Solo; 14 Versa; 16 Volvo tri-axle, open-top WRIGHTBUS ORDER 5 Streetlite; 96 Pulsar 2 on VDL SB200 platform; 21 Eclipse 2 on Volvo B7RLE platform; 207 Gemini 2 integral double deckers (97 built to TfL specification); 20 Eclipse Gemini 2 hybrid double deckers, on Volvo B5LH platform

Britain’s bus manufacturers expect to turn the corner in 2011 following a difficult period which has seen orders from their large UK customers slow to a trickle.

This growing confidence was bolstered on 22 February when Arriva announced £70m of orders for its UK bus business. A total of 419 new buses will enter service at the company’s operations in 2011.

Ballymena-based Wrightbus, which secured the lion’s share of The order includes 20 hybrid buses

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the order, said that it was “highly significant”. The company will supply 349 new buses to Arriva, including the first five of its Streetlite minis to be delivered to a major bus group.

Leeds-based Optare will supply 70 buses to Arriva. A statement issued by the company in midFebruary revealed that its order book has increased from £24.4m in September 2010 to £43m.

“The board anticipates further growth in the company’s order book during the first quarter of 2011 as a result of the level of tenders being issued by, and requests for quotations being received from, a number of major operators,” the statement said.

Optare says that the increase in orders has placed pressure on its working capital, and this is one of the reasons that it has raised £7.4m through a placing of new shares. The money will also fund Optare’s relocation from its Leeds factory. The company does not expect the lease on its current factory to be renewed beyond the end of this year. A new site has been identified and the company is in talks with the landlord.

Alexander Dennis, Britain’s biggest bus builder, has so far failed to win a slice of the Arriva order. However, the company’s CEO, Colin Robertson, is expecting to see increasing sales.

The Falkirk-based company achieved sales of £275m in 2010 and Robertson is hoping to increase this by at least 10% during 2011.

INVESTMENT w

ROUND-UP

CONTACTLESS BANK CARD DEAL Oyster upgrade will offer a new form of payment TICKETING

Oyster card readers across the whole of Transport for London’s network will be upgraded to accept contactless bank and credit card payment this year.

London will become the first city in the world to implement this technology across its entire network.

The new system will be in use on all London buses in time for the 2012 Olympic Games. It will then be rolled out onto the Tube, Docklands Light Railway, tram and London Overground network before the end of 2012.

Talks are also taking place with London’s train operators.

NEW TRAMS PLAN Croydon Council and TfL plan to lease 10 new trams LIGHT RAIL

Transport for London and the London Borough of Croydon have announced plans to lease 10 new trams for use on the Croydon Tramlink light rail system. A Croydon Council finance committee meeting this week ratified its £3m contribution to the plans.

TfL has issued a Europe-wide invitation to interested parties to bid for the tram supply contract and confirmation of a successful bidder will depend on their proposals.

SWT CUTS POWER CONSUMPTION TEMS technology to cut power consumption 10% ENERGY

OPTARE SECURES MALTA HYBRIDS 10 hybrid solo midibuses will join Arriva Malta fleet HYBRIDS

Optare has secured a £2m order from Arriva Malta for 10 hybrid versions of its Solo midibus. The 28-seat 8.8-metre models will be used on services in Valletta, the island’s capital and are the first Optare hybrids to be delivered overseas and without government Green Bus Fund subsidy.

South West Trains has announced a new initiative designed to cut energy consumption on its trains by up to 10% a year. Five trains have been fitted with TEMS technology, also known as the railway energy meter with total of 20 trains scheduled to be equipped with the technology

by May. The first trains have entered service on the London Waterloo to Reading route.

Engineering director Christian Roth said: “Currently our electric trains account for almost 90% of the total South West Trains fleet and these trains run around 33 million miles every year. This means there’s clearly huge potential to make a real difference in terms of energy reduction.”

4 March 2011 | 13

02/03/2011 20:06

INSIDE TRACK FINANCIAL RESULTS

First’s West Yorkshire profits are kept steady

COST BREAKDOWN

11.6 7.9

Margins stay high, but revenue falls as the workforce is slashed by 200 Bus operator First West Yorkshire managed to maintain profit Chris Cheek levels during Analyst the year to March 31, 2010, despite a standstill in revenue and a major rise in materials costs.

Turnover in the business remained static at £140.9m, whilst costs fell by 0.3% to £109.4m. After £9.3m worth of depreciation and amortisation charges, operating profit for the year was £22.1m, 2.3% down on the previous year’s £22.6m.

Margins moved by very small amounts - EBITDA improved very slightly, but EBIT and pre- tax margins were slightly worse. However, all remained above average for the industry.

The lack of revenue growth implies a real-term fall of

between 2% and 3% at prevailing inflation levels.

Though costs apparently remained virtually unchanged, there were some major shifts in their composition.

Thus, staff cost savings of some £10m were achieved by reducing the workforce by 200 posts, together with a major fall in pension costs. However, these savings were completely swallowed by increases in materials costs (which rose by a whopping 40%, or £8m), and a 16% increase other external charges, or another £2.1m.

The company invested over £15m in new vehicles, which took the value of fixed assets in the business up by 6% to £91.3m, and the capital employed to £95.6m, after allowing for net debt of £49.7m. The £22.1m pre-tax profit represents a return on capital employed of 25.9%.

FIRST WEST YORKSHIRE LIMITED

YEAR TO Turnover Operating costs EDITDA Depreciation and amortisation EBIT Finance costs/(income) Pre-tax profit/(loss) Tax payable/(credit) Net profit/(loss) Exceptional items Profit/(loss) for year

14 | 4 March 2011 PT01p14-15 insidetrackpt1.indd 18

27/03/10 (£000) 140,872 109,420 31,452 9,337 22,115 (2,678) 24,793 7,386 17,407 0 17,407

28/03/09 (£000) 140,934 109,705 31,229 8,603 22,626 (4,143) 26,769 7,416 19,353 0 19,353

CHANGE -0.0% -0.3% +0.7% +0.7% -2.3% -54.7% -7.4% -0.4% -10.1% -10.1%

23.0

Comment There is no doubt that the West Yorkshire operations are amongst the jewels in the crown of FirstGroup’s UK bus portfolio, regularly earning double digit margins. This is one of the reasons they also incur such regular opprobrium from West Yorkshire PTE. This was the third year in a row in which operating margins were above 15%, but one wonders how long this level of profitability can last.

A one-off fall of £6m in employers’ pension contribution occurred at the same time as a £4m saving from the cuts in the workforce. These £10m one-off savings flattered the business in the face of rising materials costs and zero revenue growth. This is not, one suspects, a recipe for continued success.

% 57.5

KEY Labour Materials Depreciation Other

% 57.5 23.0 7.9 11.6

KEY FIGURES

£10m 16%

Fall in labour costs after reducing the workforce by 200 posts

This year’s operating profit margin, virtually unchanged on last year

STATISTICS Staff employed (total) Fixed asset value (£000) Shareholders’ funds (£000) Net debt (£000) Capital employed Capital investment (£000) Dividend paid (£000)

27/03/10 2,761 91,309 45,945 49,705 95,650 15,398 10,000

28/03/09 2,963 86,137 39,675 53,171 92,846 14,816 15,000

CHANGE -6.8% +6.0% +15.8% -6.5% +3.0% +3.9% -33.3%

KPIs EBITDA margin EBIT (operating profit) margin Pre-tax profit margin Return on capital employed Net debt/EBITDA ratio Turnover per employee Pre-tax profit per employee

27/03/10 22.3% 15.7% 17.6% 25.9% 1.58 £51,022 £8,980

28/03/09 22.2% 16.1% 19.0% 28.8% 1.70 £47,565 £9,034

CHANGE +7.3% -0.6%

www.passengertransport.co.uk

02/03/2011 20:12

MORE ONLINE www.tas-passtrans.co.uk

Arriva loses £8.4m on Cross Country Second year of intercity contract sees patronage fall, contributing to a 2% pre-tax loss at the TOC Train operator XC Trains recorded an operating loss of over £8.4m in the year to December 31, 2009 - the second year of the new franchise.

The company, owned by transport group Arriva, took over the newly remapped Cross Country franchise in December 2007, after winning with a bid that promised to eliminate the £100m-plus annual subsidy the franchise received.

The complex franchise covers over 2,300 route kilometres, running a core network centred on Birmingham links to northern England and Scotland, East Anglia, the South East, South Wales and the West Country.

The most recent accounts cover the 12 months ended December 31, 2009, compared with the previous period’s 14 months from the start of contract.

On an estimated annualised basis, turnover in the business was 21% lower at £446.2m, whilst operating costs were 18% down on £451.6m, giving a deficit on EBITDA of £5.4m compared with a £9.6m profit in the previous year. After £3m of depreciation and amortisation charges, the company recorded an operating loss of £8.4m. Interest charges pushed the pre-tax loss to over £8.7m, compared with a profit of £10.5m in the first year.

The accounts show that track access charges plummeted from www.passengertransport.co.uk

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an annualised £213m to £115m, following the change of charging regime in April 2009. This in turn drove the subsidy paid by Department for Transport down from an annualised £238m to £112m.

The company trimmed its workforce by 50 posts, or 3%, but unit labour costs rose by 7.4% to £42,111.

Passenger revenue, meanwhile, grew from an annualised £305.7m to £328.9m. In the year to March 31, 2010, ORR statistics show patronage falling by 0.5% to 29.7 million, though the number of passenger kilometres was slightly up at 2,964 million.

XC TRAINS LIMITED

YEAR TO Turnover Operating costs EBITDA Depreciation and amortisation EBIT Finance costs/(income) Pre-tax profit/(loss) Tax payable/(credit) Net profit/(Loss) Profit/(loss) for year

31/12/09 (£000) 446,172 451,577 (5,405) 3,029 (8,434) 273 (8,707) (2,474) (6,233) (6,233)

31/12/08* (£000) 643,949 634,334 9,615 2,336 7,279 (3,234) 10,513 2,996 7,517 7,517

CHANGE -30.7% -28.8% -156.2% -156.2% -215.9% +1284.6% -182.8% -182.6% -182.9% -182.9%

STATISTICS Staff employed (total) Fixed Asset Value (£000) Shareholders’ Funds (£000) Net Debt (£000) Capital Employed (£000) Capital investment (£000) Dividend Paid (£000)

31/12/09 1,615 19,983 29,746 30,346 60,092 3,395 0

31/12/08* 1,662 19,617 26,543 24,914 51,457 9,994 0

CHANGE -2.8% +1.9% +12.1% +21.8% +16.8% -66.0% -

KPIs 31/12/09 EBITDA Margin (1.2%) EBIT (Operating Profit) Margin (1.9%) Pre-Tax Profit Margin (2.0%) Return on Capital Employed (14.5%) Net Debt/EBITDA ratio -5.61 Turnover per employee £276,267 Pre-tax profit per employee (£5,391) * Accounting period was for 14 months in 2008

31/12/08* 1.5% 1.1% 1.6% 20.4% 2.59 £387,454 £6,326

CHANGE -28.7% -185.2%

Comment A complex set of figures mask a pretty dreadful year for Arriva’s hard-won second franchise. As first Sea Containers and then National Express found out, once these franchises go wrong, getting them back into the black is a very tall order - requiring some hefty revenue growth or heroic cost cutting.

The headroom for cost cutting is strictly limited, whilst lacklustre passenger satisfaction scores suggest that the required revenue growth going to be difficult to achieve (especially without extra capacity on the core section).

Thus, these figures presage a fairly difficult few years for Arriva and its new German owners.

COST BREAKDOWN

REVENUE BREAKDOWN 1.3 25.4

31.1

25.1

%

%

18.9

9.7

73.6

15.0 KEY Track access Train maintenance Labour Rolling stock Other

% 25.4 18.9 15.0 9.7 31.1

KEY Passenger Subsidy Other

% 73.6 25.1 1.3

4 March 2011 | 15

02/03/2011 20:12

INSIDE TRACK MARKET MONITOR

Rail patronage shrugs off the recession

Analysis of the latest statistics from the Office of Rail Regulation shows that rail patronage growth has resumed and is powering ahead once more

Demand for passenger rail services in the UK is growing once more, Chris Cheek and any ground Analyst lost during the recession has already been made up - according to the latest National Rail Trends statistics published by the Office of Rail Regulation in January.

The provisional figures run up to quarter 2 of fiscal year 2010/11, finishing at the end of September 2010: 333 million passenger journeys were made during the quarter, an increase of 11.7% on the previous year, covering 13.6 billion passenger kilometres, 7.3% up. Between them, the passengers paid a total of £1,630m in fares, 8.2% more than in 2009.

The figures mean that over the period since the onset of

the recession, the quarterly compound annual growth rate (CAGR) for passenger journeys is 3.6% - compared with 4.5% for the five years leading up to the downturn. Looking at passenger kilometres, the gap is even narrower, with a CAGR between 2008 and 2010 of 3.4%, compared with a pre-recession rate of 4%.

Looking at the individual market sectors, fastest growth in the quarter came from the commuter lines in London and the South East, where passenger journeys bounced back by 14% - though ORR points out that this may be flattered by a switch of journeys from Travelcard to Oyster Pay as You Go. Next came InterCity services on 8.7% and regional routes on 6.6%.

In terms of passenger kilometres, the fastest growth came in the regional sector,

up 9.2% on 2009, followed by London & the South East (7.2%) and InterCity (6.2%).

Despite a slow-down in fare rises caused by the sharp drop in inflation during the recession, revenue also continued to climb.

The national increase of 8.2% was spearheaded by London and the South East (8.8%), followed by Regional on 7.9% and InterCity on 7.5%. CAGR on revenue between 2008 and 2010 was 6.0%, compared with 8.4% in the 2003-2008 period.

Rolling year figures Looking at the figures over a rolling year, the national totals for the 12 months ended September 30, 2010, show the number of passenger journeys rising by 4.4% to 1,282 million. The number of passenger kilometres rose by 5.2% to 53 billion, whilst passenger

CHANGES IN PASSENGER KM Q1, 2008 to Q3, 2010 (Source: National Rail Trends)

InterCity

revenue was 7.3% higher at £6,244m.

Nationally, the CAGR comparison is also interesting: in terms of passenger journeys, the 2008-10 figure is 2.6% against 4.2% in the pre-recession period.

Passenger kilometres show CAGR of 3.5% compared with 3.9% between 2003 and 2008, whilst the revenue figures are 6.7% and 8.1% respectively.

Looking at the individual sectors, a couple of things stand out: firstly, that both patronage and revenue in the regional sector have been growing more quickly in the post 2008 period than before it. On InterCity services, CAGR in passenger kilometres either side of the recession was virtually unchanged (4.5% since 2008, 4.6% between 2003 and 2005). Revenue, on the other hand, has failed to keep pace – by a large margin. Thus, CAGR pre-recession was running at over 9% but has since fallen back to below 6%. This reflects depressed revenue yield, caused by trading down in class and fare type.

The yield per passenger kilometre on InterCity services climbed to 12.69p in 2008, but then stuck there in 2009 and fell

London & SE

Regional

15

% year-on-year change

12 9 6 3 0 -3 -6

Q1, 2008

Q2, 2008

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Q3, 2008

Q4, 2008

Q1, 2009

Q2, 2009

Q3, 2009

Q4, 2009

Q1, 2010

Q2, 2010

Q3, 2010

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“It is a truly remarkable story. It is almost as if the crisis had not happened” back to 12.62p. In contrast, yields on commuter services were 3.6% up at 12.99p in 2010. Regional yields, traditionally much lower, remain stuck on 9.41p, just 0.4% up on the previous year.

The other interesting development on InterCity services is the recovery in average journey length. After years of decline as longer distance traffic switched to the airlines, the figure climbed back above 160km for the first time since 2004 - though it remains well below the 184km recorded at the turn of the century.

Comment Last summer, there was much talk in the trade and financial press, and amongst new ministers at the Department for Transport, about being able to cut back on spending to expand rail capacity.

After all, it was argued, the recession had depressed demand, and future growth could be expected to be lower. One or two correspondents even suggested that services could be cut back as demand fell, so saving even more money.

Interestingly, the talk died away quite quickly, and as we now know, rail investment emerged from the Comprehensive Spending Review in remarkably good shape.

Ministerial focus was switched to longer term reform in order to drive spending on the network downwards over a longer 10 to 15-year time horizon.

Even before the election, it was pretty clear that talk of a meltdown in rail demand had been overdone, and the recent figures show illustrate the point powerfully.

It is a truly remarkable story: two years on from the worst economic downturn since the 1930s, and in terms of rail demand, it is almost as if the crisis www.passengertransport.co.uk

PT01p16-17 insidetrackpt2.indd 19

had not happened: nationally, passenger demand fell in just one three-month period. After that, long distance and regional services picked themselves up, dusted themselves off and began growing again. In London and the south east, the near financial meltdown in the City provoked three successive quarterly falls in passenger numbers, but that was it: growth resumed thereafter, and within 15 months demand had not only recovered but was more than 2.2% higher than before the crisis.

This is of course a good news story for the industry, but - as with so much PR in the rail industry has the capacity to turn toxic.

The crucial issue is capacity: too many parts of the network are creaking under the weight of demand, and the previous government’s much-hyped plans for 1,300 new vehicles by 2014 fell apart under the weight of their own bureaucratic indecision.

New plans by the present government also promise substantial numbers of additional carriages, but over a much longer period - it will be 2019 before the scheme announced by transport secretary Phillip Hammond last November comes to fruition.

Even then, the proposals rely on cascading units that will by then be 30 years old to run suburban routes from Paddington, Manchester and Liverpool.

On the basis of this evidence, it must be a reasonable bet that rail demand will keep on growing in the meantime - so increasing the current levels of crowding and discomfort even further.

By 2019, we will have seen at least one general election, and will be well on towards another: expect electoral politics to take more of a hand in the future of the railways between now and then.

YEAR-ON-YEAR GROWTH IN PASSENGER JOURNEYS June to September, 2010 (Source: National Rail Trends)

8.7%

14.0%

6.6%

11.7%

InterCity

London & SE

Regional

National

QUARTERLY STATISTICS June to September (Source: National Rail Trends) PASSENGER JOURNEYS (M) InterCity London & South East Regional National

2010 29.3 226.1 77.6 333.0

2009 26.9 198.4 72.9 298.2

CHANGE 8.7% 14.0% 6.6% 11.7%

PASSENGER KM (BN) InterCity London & South East Regional National

2010 4.7 6.3 2.6 13.6

2009 4.4 5.9 2.4 12.7

CHANGE 6.2% 7.2% 9.2% 7.3%

2010 577.0 806.3 246.5 1,629.8

2009 536.7 741.3 228.5 1,506.4

CHANGE 7.5% 8.8% 7.9% 8.2%

PASSENGER REVENUE (£ BN) InterCity London & South East Regional National

ANNUAL STATISTICS Rolling year to September 30 (Source: National Rail Trends) PASSENGER JOURNEYS (M) InterCity London & SE Regional National PASSENGER KM (BN) InterCity London & South East Regional National PASSENGER REVENUE (£ BN) InterCity London & South East Regional National

2010 114.7 860.7 312.2 1,287.6

2009 107.0 822.6 299.1 1,228.7

CHANGE 7.3% 4.6% 4.4% 4.8%

2010 18.4 24.2 10.3 52.9

2009 16.9 23.7 9.4 50.0

CHANGE 9.0% 2.3% 8.9% 5.8%

2010 2,326.6 3,148.8 967.0 6,442.3

2009 2,147.8 2,970.2 884.4 6,002.4

CHANGE 8.3% 6.0% 9.3% 7.3%

4 March 2011 | 17

02/03/2011 20:14

TECHNICAL NETWORK DESIGN

Bus networks: Problems or opportunities?

Stuart Linn of Réseaulutions considers how to improve bus networks amid a backdrop of cuts The UK’s bus system is made up of a collection of loosely linked but largely free-standing networks.

These have evolved over the past century under a mix of ownership regimes - public and private and business styles. Whilst national factors, particularly regulation and public finance, can have a major effect, local influences tend to impact far more strongly on the patterns of service in a particular area.

Developments in one area may not be followed in a similar neighbouring area. At Réseaulutions, our analysis has led to some surprising results. One example, East Anglia, provides a good illustration.

Back in 1984, the National Bus Company de-merged the western part of the Eastern Counties Omnibus Company to form Cambus. The two companies were privatised in 1987 - both were acquired by their management teams. The management teams sold the companies in 1994 and 1995; FirstGroup now owns the Eastern Counties operation and Stagecoach the Cambus operation.

Post-privatisation For the past 15 years, both operations have evolved. There are some similarities : the Réseaulutions CUBS study, which compared urban bus networks, shows that the region’s main 18 | 4 March 2011 PT01p18-19 technical.indd 14

towns (Norwich, Cambridge and Peterborough) all perform relatively well - with over 65% of the population being within reasonable walking distance of a “good” bus service. (The CUBS definition of a good service is a daytime frequency of at least every 15 minutes and an evening and Sunday frequency of at least every hour). Both organisations have developed half-hourly, long-distance coach services: Lowestoft, Yarmouth and Norwich to Kings Lynn and Cambridge and Bedford to Milton Keynes and Oxford.

These routes also plug gaps in the rail network.

However, there are also considerable differences between the two businesses. The Réseaulutions map of rural bus services (RUBS) shows that many of the previous Eastern Counties routes are no longer operated by First. Four substantial secondtier operators provide much of the Norfolk network - one recently acquired by Go Ahead - with a range of medium-sized and smaller operators covering much of Suffolk. By contrast, almost all of the Stagecoach operation is similar, or better

to that previously provided by Cambus. Long-standing services by smaller operators in the St Ives area and to the north and west of Peterborough continue to be provided by those operators or their successors.

An extract of the RUBS map (displayed on the right) shows the position along the boundary between the Stagecoach and First spheres of influence.

Clearly, the culture of the original Eastern Counties company - which had permeated the entire business for over 50 years - has been overtaken by the very different approaches.

East Anglia is by no means untypical. Why do 70% of residents in Shrewsbury have a good service, whilst in Guildford it is less than 20%? The two towns are of an equivalent size, are regional centres and have the same leading operator. Indeed, Guildford’s status as a university town might have been expected to stimulate usage and service provision.

Unpredictability Both the CUBS and RUBS exercises have clearly shown that the level of service, both in urban or rural areas, is somewhat less predictable than any application of transport modelling might have suggested.

Clearly, there are a whole range of factors which can impact on the effectiveness of the local bus system, including the amount of tender support; the extent of integration between the commercial and supported parts of the network; the level of competition; the objectives,

“Even for more challenging areas, there would seem scope to avoid the worst effects of the cuts in public finance”

culture and entrepreneurial flair of the leading operator(s); the degree to which the school lift is integrated into the local bus system. Not least is the level of stability - is the network evolving in an incremental and rational manner or has it been subjected to a succession of shocks, as operators or local authorities make product and organisational changes to satisfy short term requirements?

Also, is the application of government policy helping or hindering the maintenance and development of an effective public transport system? Are there some regulatory “easy wins” that will help the process?

Advancing - or retreating?

Many urban bus systems are already very effective: for Leicester, Hull, Derby, Cheltenham/Gloucester, Oxford, Colchester, Hartlepool and Harlow over 75% of residents live within a reasonable walk of a ‘good’ bus service. Even such towns as Tonbridge/Tunbridge Wells and Weymouth score over 65%.

With the imminent reduction in public funding, there will be a strong temptation to reduce sharply the level of service both on the less successful urban systems and also on the subsidised rural routes. However, even in the most challenging territory there are examples both of very effective systems and also recent actions that have dramatically improved network attractiveness and financial performance.

Very often these improvements require a fresh approach - and a very different relationship between operators and local authorities. A willingness both to be innovative and to resist the “not invented here” attitude can be crucial. www.passengertransport.co.uk

02/03/2011 20:18

PROVIDE YOUR FEEDBACK Contact Stuart Linn at s.linn@reseaulutions.com or visit www.reseaulutions.com

Réseaulutions has been involved in a number of such projects; those for Powys and Surrey are discussed below.

Last year, Surrey let tenders in two blocks: for the Redhill/ Reigate and Walton/Weybridge/ Woking areas. The approach was to closely involve the operators in the design process.

In essence, Surrey indicated the services it wished to see operated - commercial local bus, tendered local bus and schools – and encouraged the operators to submit imaginative packages.

Surrey’s approach was, perhaps, quasi-commercial - it was looking to have good services throughout the day and week where there was strong demand and recognising there would be winners and losers.

Operators responded positively and were able to deliver very costeffective proposals through the exploitation of synergies between the three types of service. The annual subsidy bill fell by £1.75m.

In Powys, the council’s aspiration was that their hometo-school transport and local bus services should be as cost-effective as possible. The whole network was reviewed: commercial local bus, tendered local bus and the 336 school contracts. The design, consultation and procurement process was complicated and required a number of problems to be resolved. The new network, introduced in 2008, led to significant changes with both the local bus and school networks. Implementation was not completely smooth. However, 12 months on, the number of annual bus journeys had risen from 703,000 to 955,000, generating a 20% increase in fares revenue. The integration of home-to-school and local bus services reduced over-capacity, taking around 100 vehicles out of the system and generating cost www.passengertransport.co.uk

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An extract of the RUBS map shows the boundary between Stagecoach and FirstGroup in East Anglia

avoidance for the authority of £1.2m. Usage continues to grow; in year two there was a further 16% increase in fares revenue.

The lesson from Surrey and

Powys is that, even for many of the more challenging areas, there would seem to be scope to avoid the worst effects of the reduction in public finance - but achieving

success is likely to require a different approach by the key players as well as a readiness to borrow - and create - best practice.

4 March 2011 | 19

02/03/2011 20:18

TRAVEL TEST CARDIFF BUS

Capital service for a capital city? Yes, it is

Our answer to Mary Portas, Alex Warner, assesses the quality of service provided by Cardiff Bus, the Welsh capital’s council-owned bus company VISITED 28th February, 2011 SERVICE 219 buses operate in Cardiff and the surrounding area.

BayCar buses link the city and Cardiff Bay every 10 minutes FARES A single fare within Cardiff is £1.50 while an unlimited travel day ticket is £3. BayCar is £1.50 single and £2 return, but free with a valid rail ticket to any Cardiff rail station OWNER Cardiff City Council WHO’S IN CHARGE? David Brown has been MD since 2004.

WEBSITE www.cardiffbus.com

I first met David Brown, managing director of Cardiff Bus, Alex Warner at a customer Mystery traveller service in transport conference in early 2008. David was the only MD to attend of any transport operator, others obviously thought customer service not sufficiently important, or they knew all they needed to know. Perhaps they were deterred by my presence as a speaker. Anyway, Brown sat animated throughout, piping up with incisive comments and thoughtful questions. Here was a guy who had a genuine passion for delighting customers and didn’t just talk about “customer service” as some anodyne, platitude or piece of management claptrap.

It was an incentive for me to put his conviction for customers to the test as the first of my mystery shopping trips.

It hits you hard as soon as you 20 | 4 March 2011 PT01p20-21 traveltest.indd 12

land in Cardiff: ‘Capital Service for a Capital City’ is the motto for Cardiff Bus and it’s emblazoned on the side of the multitude of vehicles lining the length and breadth of the antiquated bus station as soon as you decamp the railway at Cardiff Central. Great slogan - catchy, to the point and exuding a sense of affinity and shared sense of pride with the people it serves.

The Travel Shop Across the road from the eternal bus bays is the well presented Cardiff Bus travel shop, aesthetically pleasing and unashamedly trumpeting the brand - the very antithesis of many bus operators’ travel shops that seem apologetic for residing alongside the big retail chains in the High Street. There’s no sense of being a second class citizen for Cardiff Bus and the immaculately presented green and blue company logo and season ticket adverts make their Travel Shop the first prominent outlet to be seen on leaving the railway station. Shame that the overall effect was rather ruined by a group of drivers huddling outside the entrance on a fag break, shirts un-tucked, hair-uncombed and tattoos on display - in a way you’d never see employees of the household name stores doing in their shop-window.

If the drivers inadvertently undermine the brand impression outside the Travel Shop, it’s well recovered by the two charming

and immaculately presented ladies behind the counter, who answered my questions perfectly, gaining a bonus point for offering me a Greyhound UK timetable. As the creator of Greyhound UK and until a day earlier, it’s managing director, I wasn’t even aware we’d sent Cardiff Bus any leaflets.

Tut, tut.

BayCar On the buses at last and ‘BayCar’ having been located, it was on one of the most luxuriously presented services to Cardiff Bay. The seats were so comfy and plush, they could have doubled up for a mattress, the driver impeccably turned out and the signage all upbeat. The Scania engine was as silent as the Welsh rugby fans a few yards away at The Millennium Stadium a week earlier when Johnny Wilkinson cleared the posts.

This was 21st Century travel, except with the irritations that inevitably reflect our sector’s ability to grapple with all aspects of a modernistic proposition the on-board TV that showed BBC News had no sound, there was the odd copy of the free newspaper Metro lying around and the IFF smartcard still required the customer to be issued a paper ticket. Of course, we’re an ungrateful lot and not so long ago if you’d suggested that as a bus user I’d be complaining about free papers, TV and smartcard technology, then I’d have been dumbfounded. There are

rumblings in the Valleys though about Cardiff’s oyster equivalent - it’s not yet available online and it automatically debits single tickets, rather than defaulting to a cheaper Day Ticket after the necessary trips made. Oh and the product information is in English - the ultimate crime.

The journey back was nigh on perfect - no sound on this TV either, though the driver cleared the Metro as if he was suffering OCD. This was bus travel on an unimagined scale, right down to the sign that read “please do not open these windows as it interferes with the climate control”. Gone are the days when the driver on my bus to school used to yell grouchily from his cab “oih, close that effin’ window” www.passengertransport.co.uk

02/03/2011 20:22

HAVE YOUR SAY Let Alex know what you think: alex.warner@passengertransport.co.uk

The BayCar service was introduced in 2006

“They’re not bus people our managers.

They think they’re in charge but really they know absolutely nothing” and refused to drive on until we stopped slamming it open and shut to annoy other passengers.

Other services In a nostalgic attempt to recreate the halcyon days of school bus travel, I sought a more conventional service from the outskirts of Cardiff.

At Grangetown station, the number 9 appeared dead on time, despite the text message on my Blackberry from Traveline lurching into the kind of transport mathematics that alienates www.passengertransport.co.uk

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“bus people” (more of which later) - “10:39 (+3), I presumed meant that the bus was 3 minutes beyond the scheduled time, just as 90 (+3) on the other texts I subscribe to signifies a goal arriving in the third minute of injury time. The timetable poster proclaimed “Trouble Free Travel Information” from Traveline, ironic given that a non-user might be excused for still not working out when the 10:39 would really arrive. Who is it that Traveline is inferring will give you hassle-full information?

Have they anyone in mind?

Meandering from Grangetown back to the city then on to Heath Hospital and back again on the less sexy services was still pretty impressive. Friendly drivers (no sign of name badges, though), clean exteriors (shame about the dust when I whacked the seats).

And none of those godforsaken plastic displays purchased from Rymans that sit behind the drivers cab and house those well-intentioned depot managers’ DIY notices to customers that ride rough-shod over corporate guidelines for information provision. Unfortunately, the yellow bus interiors look as crumpled and faded as the walls in a chain-smoker’s house, but overridingly, everything is geared towards strengthening

the brand equity - proper metal frames, proper templates, proper messages and everything on time.

“Job’s a good-un,” as my former boss and chief operating officer for First UK Bus, Dave Kaye, used to say.

Not even the climate control that so often cools the warm glow of a job well done - the views of the drivers - can detract from the spring in my step about Cardiff Bus. “This company looks a great bunch to work for,” I mentioned to one of the drivers with child-like enthusiasm, only to be greeted with a violently shaking head. “Well no,” he replied, “They’re not bus people our managers, they think they’re in charge, but really they know absolutely nothing”. Ah, that old chestnut - “bus people”, those great paragons of virtue. I heard it quite a bit from people who should have known better during my three years in the sector and wasn’t going to let my friend get away with this.

Customer survey forms are available on each bus in a holder next to cab, so if you pick one up when exiting, it won’t go unnoticed by the driver and you can’t help expecting to hear a muttered “go on complain about me if you want” utterance in your direction. I wasn’t deterred and picked up the form. Perception is reality and in my brief insight into the world of Cardiff Bus, David Brown and his team appear to be doing a great job - they need to be told.

VERDICT Job’s a good-un. If Cardiff Bus MD David Brown and his team aren’t bus people and don’t know a Routemaster from a Trident (which they probably do), then who cares? - they’re clearly doing a proper, good job!

4 March 2011 | 21

02/03/2011 20:22

COMMENT GILES FEARNLEY

CHRIS CHEEK

First thoughts on First’s new signing

Giles Fearnley faces some major challenges ahead in his new role as the managing director of FirstGroup’s UK bus division

The dramatic announcement of Giles Fearnley’s appointment as managing director of FirstGroup’s UK bus division brings to the group a raft of experience and an excellent track record in both bus and rail.

Not surprisingly therefore, the appointment has been widely welcomed throughout both the industry and the Square Mile - an early sign, if you like, that FirstGroup’s new boss, Tim O’Toole, is prepared to make the big and bold decisions necessary to secure a prosperous future for this massive business.

There is much more to be done, of course, and high on the agenda will be to find somebody to run the UK rail division following Mary Grant’s decision to leave the group. As has so often been the case with FirstGroup, the attrition rate amongst senior managers in the division has been high, for a variety of reasons. Mr O’Toole will doubtless be looking for a safe pair of hands who can stay the course through what inevitably will be a bumpy ride, as the consequences of the famously “back ended” rail bids start coming home to roost.

On the bus side, meanwhile, Giles Fearnley’s task is a formidable one: to turn the centrally run, bureaucratic bus business into a marketdriven, locally managed one that is capable of emulating the commercial acumen and growth achieved by UK rivals such as Go Ahead and Stagecoach.

The task will be about expanding the group’s management and supervisory capabilities and 22 | 4 March 2011 PT01p22-23 comment1.indd 1

changing the culture. Rebuilding management confidence and morale will be a key task, but may take some time, as the mentality engendered by the group’s infamous blame and fire approach will, one suspects, take some shifting. But it can be done.

The ‘slash and burn’ approach to costs for which Stagecoach was known in its early days has been replaced by a widely admired and sure-footed philosophy which delivers excellent service provision and market growth.

As Brian Souter (chief executive) and Les Warneford (managing director, UK bus) have shown, growth and success will flow from the creation of partnerships between the centre and local managements with common ownership of bright ideas, coupled with a strong culture of getting the detail right.

As well as delivering the product - something which the group has failed on far too often for its own and the industry’s good - FirstGroup then needs to invest seriously in stakeholder management. The remark that one PTE director general made a couple of years ago, “We only ever hear from First when they’re going to put the fares up,” is symptomatic of their problems in this area.

As Giles Fearnley discovered in his Blazefield days, particularly in Harrogate, strong relationships with local authorities deliver huge long term benefits. But such partnerships require time to build: service delivery is a pre-requisite, and the cement can be provided by the occasional major gesture (in Blazefield

“We only ever hear from First when they’re going to put the fares up” days, the reopening of the bus station in Harrogate is probably the best example).

Management culture and approach, service delivery and stakeholder management - that’s a formidable agenda in itself. But there’s more: future capex, coping with the economy and cost inflation, concessionary fares and not least a crucial decision as to what to do about the branding, and when. This will be a question for the whole of the main board, who will need to ask themselves at some point what to do about it. In many areas of the UK, and in both the bus and rail divisions, the ‘First’ name (which to me always smacked dangerously of hubris anyway) has become devalued and www.passengertransport.co.uk

02/03/2011 21:39

“In many parts of the UK, the ‘First’ name has become devalued and is almost toxic” Giles Fearnley

PT COMMENT

KEY CHALLENGES FOR FIRST’S BUS BUSINESS Three of the big issues that Giles Fearnley must get to grip with IT PAYS TO BE NICE Bus passengers are not a captive market that can be taken for granted. Many can travel by other means, or perhaps not even travel at all.

FirstGroup needs to adopt a truly customerfocused approach if it is to drive us passenger numbers, and profits. Nice guys can come first, as demonstrated by the bus industry’s East Midlands show pony, Trent Barton. The nice people at Trent aren’t just pleasing customers for the goodness of their heart - Trent’s high quality service is achieving much higher profit margins than the FirstGroup’s corporate machine can muster. Few will understand this better than Giles Fearnley, who provided passengers with a high quality of service in his time as co-owner of Blazefield Group.

is almost toxic. Equally however, rebranding before other improvements are firmly in place would risk wasting the potential benefits of a change of approach.

As Go Ahead has proved, a strong corporate brand projected everywhere is not necessary, and can indeed be counter-productive: the problem being that your reputation is only ever as strong as your worst performer.

What really matters to passengers is their local service (usually a route number, or a network name) and how that is delivered.

Potential users need to know that the service they use will meet their expectations in terms of speed, quality, reliability and price. In both cases, the name on the side of the bus is largely irrelevant - though a local name can be a matter of pride to local staff, politicians and other stakeholders. This is particularly true in Scotland and Wales and many parts of England, such as Lancashire, Yorkshire and the www.passengertransport.co.uk

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west country.

Livery, on the other hand, can act as a backdrop to route or network branding, and be used to project brand values: it should be about smartness, reliability and trustworthiness. But if one designs a colour scheme that does not wear well, is difficult to keep clean and dates quickly, then all that work is wasted (along with the yards and yards of vinyl that seems to be involved these days).

Turning a financially driven organisation with a blame culture into a customeroriented business able to focus on growth is a formidable task. Its achievement will require steady nerves, long term thinking and a genuine focus on enabling and empowering the group’s workforce. Fortunately, the group has now recruited two senior managers in Tim O’Toole and Giles Fearnley whose previous experience and track record suggest that if anybody can do it, they can.

TEAMWORK IS VITAL The importance of teams cannot be understated. With all due respect to Fearnley, FirstGroup’s revival is not about appointing one marvellous person: the key is to start recruiting groups of people who can deliver locally.

In the past, FirstGroup’s blame culture and centralised control meant that it struggled to attract the talent that it so desperately needs The arrival of Fearnley and the new culture will allow FirstGroup to refresh the gene pool.

Furthermore, many brow-beaten, long-serving people will readily respond to this new agenda.

AVOID SHORT TERMISM FirstGroup chief executive Tim O’Toole must take a medium term view that really emphasises continuous value-creation for shareholders. This is perhaps the most difficult challenge of all. O’Toole is sincere in his wish to transform the UK bus business, but he still has to keep the City on his side - and they don’t like surprises. The growth that O’Toole and Fearnley want to see won’t happen overnight and extra costs may be incurred in order to achieve it how will the City respond to that?

4 March 2011 | 23

02/03/2011 21:39

COMMENT GERMANY

GEORGE MUIR

More winter chaos hits Deutsche Bahn

While Germany itself is on a high, Deutsche Bahn is in trouble.

Its structure and business model is set for an overhaul

No one doubts that Deutsche Bahn can be a thoroughly competent railway operator, but last November, in St Pancras International station, listening to the speeches in front of an ICE train whose shiny new paint made the neighbouring Eurostars look dowdy, I said to myself: ‘Very impressive, but I wonder how good the train service really is in Germany.’

Well, since November, pretty awful is the answer.

While Germany itself is on a high, a new Wirstchaftswunder, Deutsche Bahn is in trouble. The problems go back a long way and after a truly shambolic winter, the worm has turned and people are loudly critical. A public which obeys jaywalking laws at 3am in the morning expects its railway to work.

In January, Der Spiegel said a “paradigm shift” in policy was to take place. A new government railway package was to separate and eventually sell off logistics and international, Schenker and Arriva; keep but ring fence Netz, the track, from Bahn, the trains; and strengthen the regulators. Almost immediately this initiative stalled. For a start, Germany does not do handbrake turns in domestic policy unlike swivel-eyed Andrew Lansley, spinning the wheel in the NHS car park - and, more pragmatically, the cash flow from Netz, track and stations, where EBITDA was a huge 33% of revenue in 2009, is urgently needed to support Logistics and pay a dividend to government. Besides, competition, which is widely seen as the way forward, is being driven 24 | 4 March 2011 PT01p24-25 comment2.indd 1

by the German courts and Lander, not policy from the federal government.

The train accident which left 10 dead near Magdeburg on January 30 underscores the criticism. A freight train on a single track line not yet fitted with train protection went through, apparently, two red signals and hit a Veolia passenger train head on. The programme to fit PZB, the basic German train protection system, on the last 3,000km of track, mostly in former East Germany, had got to the route in question but not to the section of track where the accident happened.

‘What was Deutsche Bahn doing when it should have been making the railway safe?,’ the critics ask. It was off making foreign acquisitions.

To understand what is happening, I have been over to Germany twice to have a look; I have talked to many Germans, fortunately in English, and read pages and pages of translated material.

As every reader knows, Rumsfeldian stuff happens on the railway. A train travels 40km without a driver - twice. Is this just “stuff” or is it the breakdown of proper management?

“A public which obeys jaywalking laws at 3am in the morning expects its railway to work”

It would help if you could get punctuality statistics, but you can’t, they are secret. All Deutsche Bahn will say is that the rate was 90% in 2009. The service can be excellent and ICE trains are designed for superb comfort, but last December, and not for the first time, punctuality fell apart and could have been as low as 32%. Point heaters did not work, trains could not get into depots, speed restrictions were imposed, but not reflected in the timetable, etc., etc., etc. The weather was cold, yes, and trains and overhead lines do ice up, but when this is put together with the ICE problems, the Berlin S-Bahn problems and a lot more besides, it looks very like a failure of proper management.

Why has it gone wrong?

The answer is simple, one of my new friends who used to work for Deutsche Bahn says: “Under Hartmut Mehdorn’s chairmanship investment was cut back, spare rolling stock scrapped, personnel numbers reduced, work load on the remainder increased, moral sunk, all because of a profit drive”.

Hertmut Mehdorn, in his defence, says that when he arrived in 1999 he inherited a business with losses of 1.5bn euros; when he left in May 2009 it earned profits of 2.4bn euros. As for the current situation, “the basic problem was and is that the infrastructure is underfunded” and the Berlin S-Bahn was pretty broken when it was taken over from the East German state.

This may be true, but is DB making the best of the money it has? “No,” says Pro-Bahn, the German pro-rail passenger group.

Here is a selection of what people say. Outside Germany, when they face competition, DB can be excellent, but inside Germany the monopoly mindset has got into its soul; the group is too big; internal wrangling; relations with the legalistic, probably unhelpful EBA are bad; adversarial train procurement; in bed with the unions in Berlin and elsewhere to preserve the monopoly; unable to reconcile public service with its constitutional mandate to act commercially; an introspective procurement policy unwilling to buy equipment available in Germany which would handle the cold; confusing fare structure, with some fares as expensive as a taxi (sounds familiar?); etc., etc., etc.

Rüdiger Grube, who succeeded Medhorn www.passengertransport.co.uk

02/03/2011 20:30

WHAT HAPPENS NEXT? Don’t miss the second part of George Muir’s report on Deutsche Bahn in its home market: www.passengertransport.co.uk/subscriptions

in May 2009, was supposed to be a breath of fresh air, but it is not entirely clear that he understands the problem. In an early interview, referring to the competition for regional services let by the Landers, he talked about “DB giving 17% of the contracts to the private sector”. No, Herr Grube, you did not “give” them away, you lost them to more efficient, more passenger focused competitors, providing a better service.

For example, BAG, the state transport department which lets the contracts in Bavaria, says that competition has reduced subsidy by 25% or more (across Germany, by 16% says an EU study) and that private operators have higher levels of punctuality and grow revenue faster than DB-run services. To be fair, DB, when I talked to them locally in Munich, seems intent on responding to this challenge in a positive spirit and on raising their game accordingly.

But at a corporate level, Deutsche Bahn is fighting competition; starting by tilting the playing field against competitors. Dirty tricks using DB Netz have probably ended - why should it care who runs the trains? And they were not effective in stopping competitors wining contracts.

Strangest of all is the refusal to put in place a performance regime. Last December, DB announced that it rejected and would appeal against a court decision that it should

compensate train operators for delays which were not its fault; apparently operators should prove that a delay is not caused by some other operator down the line somewhere, a hopelessly unrealistic proposition.

This lack of a performance regime with stated financial penalties for poor performance - from track or stations - is of real significance both for competition and, in truth, for the day-to-day operation of DB Netz Track and DB Netz Stations. How else are they to reflect and quantify passenger demand into their organisations?

The best, but most unlikely, thing Herr Grube could do would be to announce that Deutsche Bahn welcomed competition: first, that it would put in place proper mechanisms to make it fair and, second, that it would set about being better at passenger service than its new rivals.

This will matter. On the February 8, Abellio won a case in the German Federal Court, which declared that direct awards to Deutsche Bahn are contrary to German law. This opens up, in principle, 57% of the German rail market to open competitive tender in the next five years. On top of this, the prohibition on buses competing with rail is to end.

FEEDBACK george.muir@passengertransport.co.uk

HOW GERMANY’S RAILWAY IS STRUCTURED

Federal Railway Office - EBA Supervision, safety, planning, funding

DEUTSCHE BAHN

All track and stations www.passengertransport.co.uk

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BERLIN S-BAHN July 20, 2009, became known as Black Monday when only a third of train sets were available and several routes were shut down.

The hot summer of 2010 saw overheating in the driver cab and electrical shut downs. The cold of winter of 2010 saw points not heated, freezing pipes of sanding devices, and frozen doors. This January, on some days only 200 two-car sets were available while 550 are required for normal service.

ICE In July 2008, a broken axle caused a low speed derailment of an ICE-3 train near Cologne. The defect was due to an inclusion during manufacture in 2000. Though no defects were found in other trains of this series, cracks in two wheel sets were later found in the ICE-T series. Requirements for more frequent inspection led to sharply reduced availability.

In April 2009, a loose screw caused a door to fall off an ICE-3 travelling at high speed, and in the hot July, poor air conditioning, blamed both on the type of equipment and on poor maintenance, affected about 50 services, mainly on ICE-2 trains, one of which lead to passengers being taken to hospital.

PUNCTUALITY Federal Network Agency - Netz Path allocation, and fair competition

Lander

Independent operators 99% of long distance train services 87% of regional services (via Lander) 80% of freight service

PROBLEM AREAS

DB keeps punctuality statistics secret but claimed 90% for 2009. The state of Bavaria recently gave me a figure of 93.1% (0 to 5 min 59 sec) without route detail, but said private operations were more punctual than DB operations. A study by Stiftung Warentest, a German consumer organisation, said that from September to October 2007, more than a third of trains were late by four minutes or more. Last year, the travel log of a German friend shows that 47 of his 194 train journeys (24%) during 2010 were over five minutes late.

The government’s recent winter report gave punctuality of 77% for last December but Stiftung Warentest said it was closer to 32%, varying on any day from 14% to 56%.

4 March 2011 | 25

02/03/2011 20:30

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PT01p26_ads1.indd 12

02/03/2011 20:56

“I guess many people may expect my loyalties to be with the local authorities. Forget it”

HOMER’S ODYSSEY

Let me make it clear: I don’t do sentiment Our Westminster insider imagines the private thoughts of the department’s new permanent secretary, Lin Homer

Well, I’ve been in post for a month or so and, to my knowledge, not yet dropped any clangers. Actually, things seems to have gone really rather smoothly, helped I guess by the fact that transport has hardly attracted any media or political attention recently.

Still, there are plenty of dark clouds on the horizon, so I had better enjoy the good times while they last.

We are clearly going to have a bit of a bumpy time over the decision on IEP, with all sorts of suggestions that Alstom will be in court the moment the decision is announced. And I am told that Bombardier will kick up a storm if they don’t get the Thameslink rolling stock order, with threats to close Derby likely to become reality. I’m learning fast that there is a lot of sentimentality around the railways, and Derby seems to have developed some kind of iconic status in the industry given its family tree back to the days of BREL. Well, the industry had better get one thing straight.

Just as Alistair Campbell famously said “we don’t do God” I can make it crystal clear I don’t do sentiment. I can see this getting tricky however, because the Derby political mafia will get very exercised indeed if the closure of Derby looks like becoming a reality, and I anticipate political intervention here.

I can also see some critical press headlines when the shortlist for the West Coast Main Line franchise competition is announced in a few months time. With the French, Germans, Italians and Spanish operators all said to be www.passengertransport.co.uk

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interested, I can see further critical comment about handing our railways over to foreign companies. I’m relaxed, although the idea of the Italians running the franchise offers up the alarming prospect of the Pendolinos being renamed the “Bunga Bunga” train! Travelling on the West Coast could become an entirely new experience!

There is clearly going to be a lot of grief, too, as the impact of local authority cuts on local public transport starts to hit home. I suspect we are on a hiding to nothing here and will

COMMENT

just have to take the inevitable criticism that the withdrawal of bus services is all down to central government budget cuts. Given my local government background I guess many people may expect my loyalties to be firmly rooted with the local authorities. Forget it. In fact, quite the opposite. I know what scope there is to deliver the budget cuts without taking a sledge hammer to front line services.

Of course, the two biggest clouds on the horizon are high speed rail and aviation policy.

Here, we will just have to accept that we are going to upset large numbers of people, whatever we do. I’m actually quite looking forward to the battles ahead. They will test the resolve of politicians, big time. We all know that the Conservative’s commitment to high speed comes from the very top, but will Cameron’s nerve hold when the Chilterns march on No 10?

What surprises me about the high speed debate is just how silent the “pro” groups are. At the moment the “anti” lot in the Chilterns have captured all the coverage, and look pretty well organised (and well funded too!). If the “pro” groups don’t start to get their act together soon they could just lose this by default. And once the department starts to put details to the country on where additional runway capacity will be provided, the combined force of anti high speed rail and anti runway development might just be too much for the coalition to handle. This is going to get nasty!

One thing is clear to me already. Transport is a mightily complicated brief - far more so than most give credit for. I can’t pretend to understand much of it, and actually, I don’t really intend to start. It’s not the job of a permanent secretary to get too involved in policy. I am going to leave policy firmly up to my director generals and their teams who have much more knowledge and experience of transport than I will ever have. I’m not going to second guess the knowledge and expertise of the likes of Steve Gooding and Bronwyn Hill who have been around the block for many years.

My job’s to oversee the orderly management of the department, no easy task at a time of major change and job cuts. I’ll keep a watchful eye on policy, of course, but in the main I will leave policy development and implementation to others. I just hope they get it right!

4 March 2011 | 27

02/03/2011 20:32

EVENTS

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TELL US ABOUT YOUR EVENT To advertise your conference or event call us on 020 7749 6909

MARCH 17 THE BIG BUS DEBATE: THE FUTURE FOR LOCAL BUS SERVICE DELIVERY This conference brings the different parties together to debate the future of bus policy and discuss innovative ways in which service delivery can be improved. Speakers include transport minister Norman Baker, Jonathan Bray (PTEG) and Mike Cooper (Arriva).

LOCATION Eversheds, 1 Wood Street, London EC2 CONTACT The Waterfront Conference Company Ltd T: 020 7787 1210 E: conference@thewaterfront.co.uk W: www.thewaterfront.co.uk 21 TRANSPORT ACCESSIBILITY: STEERING A COURSE BETWEEN RIGHTS AND CUTS This conference will explore the full range of legal and policy changes and proposals at European and UK levels and what they mean for local authorities, transport providers and disabled people. Speakers include Nigel Dotchin, head of equalities policy, Department for Transport.

LOCATION Eversheds, 1 Wood Street, London EC2 CONTACT The Waterfront Conference Company Ltd T: 020 7787 1210 E: conference@thewaterfront.co.uk W: www.thewaterfront.co.uk 30 PTEG BIG CITY CYCLING CONFERENCE: GOING UP A GEAR - URBAN CYCLING BEYOND LONDON This conference provides an opportunity to hear from some of the most successful urban cycling initiatives in the UK and to identify the best and most cost effective ways of bringing about www.passengertransport.co.uk

PT01p28-29 events.indd 2

a step change in the levels of urban cycling outside London.

Speakers include transport minister Norman Baker and Paul Scriven, leader of Sheffield City Council.

LOCATION Sheffield CONTACT The Waterfront Conference Company Ltd T: 020 7787 1210 E: conference@thewaterfront.co.uk W: www.thewaterfront.co.uk

APRIL 10-14 59TH UITP WORLD CONGRESS AND EXHIBITION. BOOSTING PUBLIC TRANSPORT: ACTION! The UITP Congress will present audacious developments and radical paradigm shifts. Dubai is the ideal host for the 59th World Congress. With its extensive multimodal public transport, it is recognised for its forward-looking and daring mobility policy: public transport modal split shall soar from 6% in 2005 to 30% in 2020.

LOCATION Dubai World Trade Center, United Arab Emirates CONTACT UITP (International Association of Public Transport) T: + 32 2 673 61 00 E: uitp2011@ meetingmindsdubai.com W: www.uitpdubai2011.org 28 THE LONDON TRANSPORT AWARDS 2011 The London Transport Awards 2011 brings together the transport community to recognise and celebrate transport industry achievements in the Greater London area. Former London mayor Ken Livingstone will deliver the keynote address.

LOCATION Novotel, London West CONTACT Transport Times Events T: 0207 036 8572/74 E: grant.poulton @transporttimes.co.uk W: www.transporttimesevents.co.uk

MAY 12 CAN RAIL WIN ITS CASE? GETTING VALUE FOR MONEY FROM THE RAILWAYS This event brings together all the big players to discuss the critical issues that will re-shape the future of the industry. Speakers include transport secretary Philip Hammond, Sir Roy McNulty, and Bill Emery (ORR).

LOCATION To be confirmed CONTACT Transport Times Events T: 0207 036 8572/74 E: grant.poulton @transporttimes.co.uk W: www.transporttimesevents.co.uk 16 THE FUTURE OF STATION DESIGN CONFERENCE 2011 Chaired by Chris Green, the former CEO of Virgin Trains, and hosted by Maggie Philbin (BBC presenter), this conference will feature presentations from Anthony Smith (Passenger Focus) and Gavin McKechnie (Network Rail).

LOCATION German Gymnasium, Kings Cross, London CONTACT FOSD Ltd T: 01273 204200 E: info@fosd.eu W: www.fosd.eu 17-18 THE 2011 ALBUM CONFERENCE: EMPOWERING OUR PEOPLE The annual conference of ALBUM, the Association of Local Bus Company Managers. This year’s hosts are Paul Jenkins, who heads Thamesdown Transport in Swindon, and James Freeman, his opposite number at Reading Transport.

LOCATION De Vere Wokefield Park, near Reading CONTACT Venues Event Management T: 01793 792186 E: album@venuesevent.com W: vem.venuesevent.com/album/

26 A SMART FUTURE FOR TRANSPORT This event provides an opportunity to hear all the latest developments and innovation in smarter travel.

Speakers include transport minister Norman Baker, Shashi Verma (TfL) and Elaine Rosscraig (Stagecoach).

LOCATION The Royal Society of Medicine, London W1 CONTACT Transport Times Events T: 0207 036 8572/74 E: grant.poulton @transporttimes.co.uk W: www.transporttimesevents.co.uk

JUNE 9 PRIORITISING INVESTMENT IN ROAD AND RAIL INFRASTRUCTURE This conference examines the government’s current infrastructure investment commitments looking at how value for money can be obtained and focuses on the opportunities for investors.

Speakers include Professor Stephen Glaister of the RAC Foundation.

LOCATION Bircham Dyson Bell, 50 Broadway, London SW1 CONTACT The Waterfront Conference Company Ltd T: 020 7787 1210 E: conference@thewaterfront.co.uk W: www.thewaterfront.co.uk 16 THE SCOTTISH TRANSPORT AWARDS 2011 The Scottish Transport Awards 2011 brings together the transport community to recognise and celebrate industry achievements across Scotland.

LOCATION Grand Central Hotel, Glasgow CONTACT Transport Times Events T: 0207 036 8572/74 E: grant.poulton @transporttimes.co.uk W: www.transporttimesevents.co.uk 4 March 2011 | 29

02/03/2011 21:22

CAREERS

Franks urges rail staff to develop their skills Programme is helping staff across all grades IRO

The Institute of Railway Operators is seeking a new wave of recruits for its Professional Development Programme.

Launching its PDP for 2011/12, the IRO said that staff at all grades were seeing their prospects flourish as a result of participating in the programme - 150 students have already achieved either a certificate, diploma or degree in Railway Operational Management.

“Our PDP is fantastic as it gives people a realistic, achievable and ultimately

30 | 4 March 2011 PT01p30-31 careers.indd 1

David Franks

rewarding goal,” said IRO chairman David Franks.

“It also unlocks people’s potential. It’s so important that rail operators across the industry encourage their staff to acquire and develop their skill set, as possessing the right skills is becoming critical to running a successful operation.”

SKILLS PRIORITIES HENDY IS CILT HIGHLIGHTED PRESIDENT ELECT

2010/11 Sector Skills Assessment is published

London transport chief to succeed Sir Moir Lockhead

GOSKILLS

CILT

New research from GoSkills, the Sector Skills Council for passenger transport, highlights the latest skills priorities for the sector, including the need for improved management and leadership, customer service, technical and basic skills in particular.

The findings come from GoSkills’ 2010/11 Sector Skills Assessment reports, a comprehensive review of Labour Market Intelligence for passenger transport industries, produced annually. The research draws upon a wide range of data sources and GoSkills’ own primary research to present the most up to date view of the skills landscape for the sector.

Peter Hendy, commissioner, Transport for London, has been nominated president elect of the Chartered Institute of Logistics & Transport. He will take over the role of president from Sir Moir Lockhead, the former chief executive of FirstGroup on May 20, 2011.

Hendy is a fellow of the institute and has been a vice president since 2008. Commenting on his forthcoming elevation to the role of president, he said: “As a member of CILT for many years, I am looking forward to ensuring that the Institute remains at the forefront of passenger transport development, and helping to shape and develop the institute’s vision for the next 25 years.”

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RECRUITMENT

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DIVERSIONS

The man in the funny hat? That’s the mayor Boris Johnson’s head gear divides rail commuters London mayor Boris Johnson is not adverse to buffoonery when it comes to a juicy photo opportunity.

So when opening the Overground extension to Highbury & Islington this week he didn’t disappoint.

After being handed an official Overground woolly hat, he eagerly slapped it on his head for the massed media and somewhat bemused commuters waiting for the first service to depart.

However, Boris wasn’t a hit with all those attending the opening.

“Stupid ******* idiot,” one less than impressed commuter was heard to mutter.

THEY GIVE, AND THEY TAKE AWAY

Matthew Parris, former Tory MP and now a writer and broadcaster, is dismayed that his local bus service is under threat, while many users, including himself, ride for free. In an article in The Times, he told how in mid-February he had boarded the 172 bus, operated

by Hulleys of Baslow, for the

On the ‘ed Boris!

five-mile journey from Matlock to Elton. Parris, 61, is entitled to free travel, but as someone who is both healthy and wealthy he felt ashamed about using it.

“I think I’d rather pay for this,” he said, offering his £2.40. The driver, aware that he didn’t have to, responded kindly: “No don’t.

Nobody else does. The politicians give people a free bus pass, then take away their bus.”

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EXPIRY DATE

FAREWELL TO THE ‘FRUITY FRIDAY’ Sad news reaches us from South Yorkshire PTE where the organisation’s staff well-being scheme has been scrapped in order to save its £8,000 annual cost. The project had some worthy aspects - blood pressure checks, personal financial advice and, um, massages - that had helped to significantly reduce employee absence levels. But the scheme’s demise has also seen the axe being taken to ‘Fruity Fridays’ where the PTE supplied a piece of fruit to each employee once a month. Officers are said to have gone bananas at the news...

SCHOOL CHUMS? The recent appointment of Leon Daniels to head surface transport at Transport for London seems good news and, dare we say, an inspired appointment.

After all, he knows London’s transport system and his new boss, TfL commissioner Peter Hendy, very well.

As one wag put it upon hearing of the appointment: “TfL have presumably paid thousands to headhunters to recruit someone Peter has known since they were both about 11...”

BEST OF THE BLOGS

VOTE ON IEP NOW!

Blog readers vote on the DfT’s HST replacement RAILWAY EYE

The Railway Eye blog has long been sceptical of the Department for Transport-led Intercity Express Procurement project, so its approval was bound to elicit a response. ‘It’s time for an exciting new Eye survey!’ shrieked the blogger, pointing readers to vote on whether IEP is a suitable replacement for the veteran High Speed Train.

And the voting choices? ǼǑ No/Nein/Non Je vous verrai au tribunal!

So far the noes have it.

BEAUTY CONTEST Rotala’s new Preston Bus livery divides blogosphere OMNIBUSES

The Omnibuses blog last week reported on Rotala’s recent purchase of Preston Bus. The AIMlisted group has unveiled a new livery, but opinion on its choice of silver, lime green and blue was divided. One commentator noted: “Who on earth came up with such a load of tosh?”

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