Rail operators awarded new contracts for Great Western and Southeastern franchises
First Group and Go Ahead Group have been awarded new contracts to run the Great Western and Southeastern rail franchises respectively with just a day to go before the existing deals run out.
The new contracts will run concurrently with the emergency measures the government put in place last week to protect the rail industry against the coronavirus pandemic.
After the six-month emergency period ends, Go Ahead Group will continue to run the Southeastern line under the management contract model introduced by the government, which will see the firm paid a set fee to operate the service.
The new contract will last for a year, with the option of extending it for a further 12 months if the Department for Transport is happy with Go Ahead’s performance.
The management fee will be set at a maximum of 2 per cent of Southeastern’s cost base before the pandemic began.
The arrangement means that 90 per cent of Go Ahead’s revenue is now derived from contracted markets where there is no direct revenue risk from changes in underlying travel demand.
First Group, whose new contract will run for three years, with the option of an additional one year extension, will revert to a Forecast Revenue Mechanism (FRM) after the emergency measures period ends.
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Under this type of contract, First Group share the contract risk with the government, meaning that its revenue will be protected if it is higher or lower than forecast.
The measure means that the operator will retain some degree of protection against external events after the emergency controls period concludes.
The contract is further evidence of the likely direction to which the rail franchise model will pivot once Keith Williams’ long-awaited review is published.
When First Group was awarded the Avanti West Coast contract last year it was also based on a FRM model, which the government at the time said was in line with the direction of the review.
Williams himself said: “This West Coast Partnership delivers for passengers. It is a step forward that is firmly in line with the review, introducing benefits for passengers today and capable of incorporating the reforms needed for the future”.
Rail minister Chris Heaton-Harries welcomed today’s new contracts, saying: “These contracts will keep services running in the short-term but also are positive news for passengers in the future, focusing on more reliable services, extra capacity and improvements to the stations they use every day”.