UK officials nationalize famed East Coast main line, again

RELATED TOPICS: INTERNATIONAL | PASSENGER | REGULATION
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EastCoastNationalization
The current Virgin and Stagecoach operation on the East Coast main line uses ex-British Rail equipment including this high speed train seen at Leeds, England, in 2015.
Keith Fender
LONDON — The British government announced this week that it will take over the operation of intercity trains on the London—York—Edinburgh East Coast route with a new government-owned company. The new firm will replace the current Virgin East Coast operator and will be known as London North Eastern Railway, reviving the name of the pre-1948 private company that made the line world famous with steam locomotives such as Flying Scotsman and the world's fastest steam locomotive Mallard.

Announcing the development to the U.K. parliament on May 16, the British Transport Secretary Chris Grayling said the government-owned company will take over within a few weeks on June 25 and will run the service until at least 2020. A public-private partnership is planned to take over longer term.

In late February, the government announced that private British operators Stagecoach and Virgin, would hand back the franchise to the British government as the operator had miscalculated how much revenue it would make and how much cash would be needed to would need to fund the operation and contractual payments to the government.

The operator had based their winning bid for the contract on growing passenger numbers from new routes, additional trains and from 2018 onwards introduction of new Hitachi-built Intercity Express Trains replacing older ex-British Rail equipment dating from the 1980s and 1990s. The growth plan relied on government owned infrastructure manager Network Rail, which owns all the tracks the private operator uses, to add new tracks and grade-separated junctions while boosting the route’s electric power supply. All of this infrastructure work is either behind schedule or currently on hold due to financial constraints.

By the time it ends, the contract will have cost majority shareholder Stagecoach around $280 million and Virgin a smaller amount. The private operators have chosen to hand back the contract instead of being liable to pay the U.K. government as much as $3 billion is fees. Virgin and Stagecoach continue to operate the separate Virgin Trains service on the "West Coast" route from London to Manchester/ Liverpool/Glasgow and this is unaffected by the change on the East Coast route.

History repeats itself
The East Coast route has had a history of franchisees getting into financial difficulty since the U.K. privatized its railroads in the mid-1990s. Government-awarded franchise concessions require the operator to take some of the commercial risk and pay premium fees from revenue to the government.

The collapse of the most recent East Coast operation is the second time a government-owned company has been required to step in to replace a failed private one on the same route. British transport group National Express started running the route in December 2007, but the contract was terminated only 18 months later as the company was unable to meet the commitments it had made. A different government-owned interim company — known as East Coast — then took over for four years before Virgin and Stagecoach picked up operations.
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