Driving up performance and reliability: Virgin Trains new chief executive, Tony Collins, talks frankly to IRJ's senior editorial consultant, Mike Knutton, about what the future holds for the ambitious yet trouble-hit operator

International Railway Journal, Nov, 2004 by Mike Knutton

DESPITE acquiring a 390 million [pounds sterling] fleet of new Voyager trains for CrossCountry services (something that would never have happened under British Raft) Virgin Trains' bid to run the franchise until 2012 was rejected by the Strategic Raft Authority (SRA) in August on value-for-money grounds.

But that reason, says Collins, is too simplistic. "We valued the bid around the risk profile we were asked to take and the margins that were inherent in the profile. There were also checks and balances in what we bid, which meant that we would not be able to make super-profits. Basically, there was a revenue and profit-sharing scheme so that if we were conservative on revenue, for example, there was a mechanism for the SRA to get a share.

"But with hindsight, perhaps the whole commercial principles we were negotiating around were not really focused around the main issue for the government, which was the headline subsidies. Perhaps there, we and the SPA misjudged the situation," he acknowledged.

So the CrossCountry franchise will be rebid. Interestingly, the word on the street is that the franchise could be re-mapped as an even bigger network than it is at the moment. Virgin Trains is currently operating CrossCountry on a management contract "for as long as the SPA wants us there".

"Clearly we are disappointed," says Collins, "because we have gone through all the pain of having the trains built, negotiating a new timetable, increasing business by 40%, and making CrossCountry a proper intercity operator rather than just the poor relation. And yet, for all that, there is the chance that we may not be able to enjoy the benefits of all this."

Collins puts a positive slant on the situation and says that if the franchise is going to be bigger and for a longer period, say 20 years with five-year break clauses, there would be more opportunity to invest in additional vehicles and other things such as stations. "We strongly believe that one of the next bottlenecks for the British rail industry will be stations unable to handle a massive increase in passenger numbers. There is a real opportunity here for operators to take the lead in developing stations because they know their passengers and know that there is an appetite in the private sector to invest in them," he said.

Virgin Trains will carry on operating CrossCountry under the management contract and believes that if it has to work like this for the next year or two, it will be best-placed in any future bidding, especially if it is for a longer period.

Virgin Trains' West Coast franchise is also suspended. Offers were made under a process agreed with the SPA, but the SPA was not happy and it agreed to suspend negotiations until the new 200km/h tilting Pendolino services, launched in September, were up and running and well bedded in. "Discussions are continuing but it will probably be next year before we get round the table again for serious negotiations," said Collins.

Clearly, Virgin Trains would like to get the West Coast issue resolved as soon as possible, as it is also interested in bidding for the East Coast, Great Western, and Silverlink franchises. "There will be an awful lot of activity over the next two or three years. From the shareholders perspective, Virgin is still very committed to rail despite all the knocks we have taken," Collins said.

New Trains

Both the Bombardier Voyagers and the Alstom Pendolinos have experienced teething troubles and passengers sometimes wonder why new trains are not like new aircraft in the sense that they work "straight out of the box" (because if they didn't they would fall out of the sky). Collins has the answer: "The comparison is that the growth in both automobile and airline industries has been evolution not revolution. In the rail industry we never build the same thing twice so we are always inventing something new. We go back to square one and don't learn the lessons.

"The issue will arise again in the big debate about the replacement for the 200km/h diesel High Speed Trains. It will probably be something new again, but I say you need to look at the economics: do you want a super-reliable train that is cheaper and easier to maintain or a new concept that implies a reliability curve and extra costs because there are high fixed costs getting used to looking after it.

"I think as an industry we are more engineering-led than any other. That is not a criticism of engineers, but the air industry is much more passenger and business led. Aircraft manufacturers have total control of the airframe and engines and they give the customer flexibility only on interiors. They control the clever bits very tightly. It is a cost:benefit approach."

An aircraft engine, he went on, has probably been in development for 20 years. It is a derivative of a previous model and is tested to destruction before going into service. "If we could do the same and run the train on a test track 24 hours a day for six months we could match that. But, with Pendolinos, for example, we were taking a train out of the factory and putting it into service with only 800km on the clock. We had no alternative because we couldn't get any access to run it longer," he added.