To see one of the problems that train companies sometimes face, one only had to look out of the window. The river, normally placid, had burst its banks and the tops of safety railings had all but disappeared.
With no let-up in sight, it had been raining all day, things could only get worse. The sodden raincoat hanging on the office hat stand was testament to the state of things outside.
The man looking out of his window was David Horne, managing director of Virgin Trains East Coast, and the river in question was the Ouse – flowing, or that should be flooding, through the soggy city of York.
David took over the reins of the East Coast franchise when it became Virgin Trains East Coast in March 2015. Before that, the route was run by a subsidiary of Directly Operated Railways – the company formed by the Department for Transport to run the franchise when it was ‘handed back’ by National Express on 14 February 2009.
At that time, the government’s intention was not to permanently renationalise the line, though trade unions had called for that, but to return it to the private sector in December 2013. Instead, the process took until February 2015.
By all accounts, East Coast did a good job. Customer satisfaction was high, and the company paid £1 billion back to the government over the course of its franchise.
There was controversy surrounding the letting of the franchise to Virgin, with some elements calling for the train company to remain nationalised, citing the one billion repayment as an example of how a railway could be run with no ‘fat cats’ creaming off the profits. However, the company used relatively old trains, with low leasing costs, and the new Virgin Trains East Coast is committed to repaying £3.3 billion over eight years, despite replacing its fleet of ageing HSTs with new Hitachi-built Class 800/801 IEP trains.
EMT vs VTEC
David moved to Virgin Trains East Coast (VTEC) from another Stagecoach company, East Midlands Trains. Once he was settled in his York office, the same one that Karen Boswell had used when she ran East Coast, he could take stock of the differences between his new and previous charges.
‘First of all, it’s clearly quite a different railway,’ he told RailStaff.
That’s quite true, VTEC has 3,000 employees against East Midlands’ 2,000. But it is more than that. much further distances than any other train company in the UK, and indeed the trains are busier in terms of the load factor than other train companies across the day. It feels like we are a hotel on wheels at times; people are staying with us for several hours, we’re trying to keep them well catered, we’re trying to give them a relaxing enjoyable time when they’re with us. It just so happens that they’re getting on in one city and they’re getting off in another.’
The average journey time is between two and three hours, but some customers on, for example, the Aberdeen service, could be on board for six or seven hours. Hence the quality of the on-board catering service, and the whole ‘hotel on wheels feel’, is important.
‘There are clearly some differences in terms of the actual nature of the railway,’ David continued. ‘We’re covering a much bigger geography – we’ve got depots in London, Craigentinny in Edinburgh and at Clayhills in Aberdeen. So the whole operation is spread out far more than East Midlands Trains was.’
There also are no commuter services. ‘Of course, some people are making shorter distance trips, but the majority of customers are travelling longer distances, and indeed they could be making a long-distance journey with us but it’s actually part of an even longer one.
‘When I took the Inverness service for the first time, I met a couple of customers on it who got off at Aviemore but they were travelling on to the Shetland Islands. They were spending the night in Aviemore before carrying on the next day by ferry. So you just get a sense that, even though we’re carrying some people for hours and hours and miles and miles, for them it’s a much longer journey. It’s really interesting discovering what people are using the trains for.’
Back to the private sector
The other major difference was that David Horne had to return a nationalised company to the private sector.
‘It’s fair to say that East Coast had run it quite close to a commercial business and they clearly made some investment into improving the service over the five-year period.
‘I think, though, they were clearly limited in what they did and we found a number of things in taking over where we thought, this doesn’t feel right, this doesn’t look right for a business of this scale, or of this potential, to be honest.
‘One of the things that the private sector brings to the railway is that ability to take a risk with some things and to also drive for some long-term sustained improvements. So, the private sector takes on projects which might not pay back in the first year or 18 months, but we know they are going to pay back over, say, a five-year period or a longer term. That’s what we’re now getting into.
‘We can take the approach of asking ourselves, what can we do to drive improvement to this business over this eight year period? It’s worth making that effort, whereas East Coast didn’t know that they were going to be there in two years time, they went through cycles when the franchise was going to be re-tendered. So East Coast wasn’t able to plan for the longer term in the same way that we are, and also they had to deliver these financial targets each year as well and they weren’t able as easily to look at investments that have got a longer-term payback.
‘They had to keep it going but it was only an interim arrangement, and to the extent that there was a plan it was only for 12 or 18 months. So the improvements that anybody can make when they’ve got that constraint are always going to be limited.
‘A great example is the train refurbishment project that we’ve got underway now. That’s going to take us 18 months to complete. We started it back in the summer and it will run through until early 2017. Then it will start to pay back for us, but it’s going to transform the experience our customers have because every one of the 45 trains that we’ve got today is going to get that refurbishment. We’ve got some real flair coming in terms of the design and in terms of how we’re going to change the passenger environment.
‘What East Coast did during their tenure was they renewed some of the fabrics, and they renewed some of the seat covers, but to the previous design. It was all about repairs and maintenance. Whereas we’re able to bring a complete new vision as to how we want to drive the business forward. The first stage of that is asking ourselves what can we do to improve the experience for the customers whilst we’ve still got the existing trains, but then we’ve got the IEPs to look forward to.’
Short term – long term
No doubt passengers will be pleased that VTEC’s trains are all being refurbished, but is it really a sensible commercial decision when they have only three-year’s life in them before the IEP trains arrive?
‘We’ll complete the refurbishment in early 2017, and the last IEPs will be delivered to us in 2020. But these trains were last refurbished 10 or 12 years ago, and now we’re part of the Virgin family, people expect far more from Virgin than they do from other companies, so we have got to live up to that. They expect us to invest, they expect it to look different, they expect to get a better service.
‘So, even though these trains might only have three more years left, and other companies might say, “Well, they’ve only got three years left, we’ll just make do,” because of the expectation that comes with being part of the Virgin Group, we are absolutely investing and we’re trying to drive up that experience to match that expectation.
‘Of course, it works quite well with the strategy because what we’re trying to do is build the business up to the point when the IEPs come in. They will bring us something like 25 per cent extra capacity, so if we can build the market and build the passenger numbers to that point, then it’s good for the business.’
It’s not just a cosmetic refurbishment either. £6.5 million is being invested in making the current Class 91 locomotives and Mark 4 coaching stock more reliable.
One thing that wasn’t clear from the conversation was whether the IEPs, the class 800/801 trains, would replace the entire fleet.
‘We’re planning to keep six rigs of Mark 4s, subject to us getting the track access right to deliver our full timetable,’ David clarified.
So there will be six rakes of Mark 4 coaches, as well as 65 IEP trains. But even they won’t all be the same. Some will just be electric trains, albeit with a single diesel engine to allow them to be driven out of a failed section or around the depot, while others will have a complete set of diesel engines as well as two pantographs so they can be used equally easily on electrified and non-electrified lines – the bi-mode trains.
‘We’ll have quite a lot of services that go off the electrified network because we’ve got extra services to Harrogate, services to Huddersfield, extra services to Lincoln. We’ll have an extra service to Sunderland, and then we’ve got the services to Aberdeen and Inverness,’ David explained, using his hands to outline the network.
‘Of course, as some of these routes get electrified or part-electrified, under the trans-Pennine proposals or the Scottish electrification proposals, then we’ll be able to take advantage of it. So we’ll only use the diesel capability of the trains when we’re off the main network, whereas today the HSTs are diesel powered under the wires all the way, from London to Edinburgh in some cases.
‘But one of the really great features of the IEP is that they can switch from electric to diesel on the fly. So we’ll be able to be on electric mode leaving Edinburgh, and we’ll only need to switch to diesel when we actually come off the Edinburgh-Glasgow main line.
‘They’ll also give us more resilience when we face disruption and we have to divert, which we have to do from time to time. We sometimes divert via the joint line or divert via Leeds. So to have a greater proportion of the fleet with a diesel capability that we only have to switch on when we need it, that will give us great flexibility.’
Trains, planes and automobiles
Each of the new trains will carry more people, and that alone will increase capacity. However, the Department for Transport confirmed the order for the new IEP trains before Virgin and its competitors put in their franchise bids. That, in effect, forced Virgin’s hand. They couldn’t opt for other solutions, such as running Pendolinos on the London to Scotland route, something which had been tested.
‘That was actually an East Coast test,’ David commented. ‘The government did say we had to take the new trains, but fundamentally we are happy. I’ve been on a couple of the test trains and they are clearly well built and attractive. They’ve got a lot of good space inside which is important these days. They have good luggage capacity and good legroom, and they’re going to have good ride and good performance. So we were perfectly happy with being asked to take these trains into the fleet.’
While the biggest challenge to David’s business at East Midlands Trains had been from cars and buses on the motorways, on journeys between London and Scotland it is the airlines. How will that competition be overcome?
‘Attracting passengers from the airlines on the Scotland to London route is a key part of our mission and what we are absolutely looking to do with the IEP trains. At the moment we’ve got a 25 per cent market share, or thereabouts, of the Edinburgh to London business market, the other 75 per cent fly.
‘Now we know from Virgin’s experience on the west coast route, where they’ve got the Glasgow journey times down from something over five hours to around four and a half, they have captured quite a significant number of customers form the airlines.
‘Now between Edinburgh and London, the first southbound train of the day, the 5:40, only stops in Newcastle and it does the journey in four hours. But that’s only one service. The typical service during the day is at best four hours 20 minutes.
‘With the IEPs, we plan to get that down to four hours. Then, from next May, we will have put in extra Edinburgh services so the frequency will be two trains per hour throughout the day as well whereas, for part of the day at the moment, we’re only hourly.
‘So the combination of end-to-end speed and frequency, combined with extra capacity and good service, will give us the ingredients to take on the airlines.’
Surely ticket prices will come into the equation as well as journey time?
‘Well, like all of these things, there’s a range of prices,’ David Horne commented. ‘There’s some very competitive deals they offer and there’s some very competitive deals we offer and that will continue to be the case. With the extra capacity that the IEP trains will bring, we will be able to offer great deals on the off-peak trains.
‘Then you have to factor in the cost of getting to the airport, parking at the airport or taking the Heathrow Express service.
‘I think one of our great selling points continues to be the fact that you can work on the train, you can relax, you can read, and that is undisturbed time compared to the hassle and the upheaval and all the rest of it that you have when you’re flying. The Wi-Fi system that we’ve now got on-board performs very well so people can work and stay connected. Whereas, if you’re in the air, then you can’t.’
West Coast – East Coast
Virgin Trains East Coast is 90 per cent owned by Stagecoach, 10 per cent by Virgin Group, whereas the west coast operation is 51 per cent Virgin and 49 per cent Stagecoach. Yet, in the public’s perception, they are both Virgin companies. And that is how they are being run – as Virgin companies. The board of VTEC has two members from Stagecoach and two from Virgin, so at board level it is 50/50.
‘Some of our financial services are with Stagecoach,’ David explained. ‘Some of the accounting and things like that. But then we will draw on the resources of Virgin where they’ve got particular expertise. So we may call on Virgin for marketing and branding and in that sort of area. The percentages are less relevant than the fact that it’s a joint venture. And that’s reflective of how it works at West Coast as well.
‘Decisions are taken in partnership. We need to keep both Stagecoach and Virgin appraised with what we’re doing – they’ve both got big stakes in the business.
‘But Virgin and Stagecoach have been working together since the end of the 1998. That’s now 17 years. It’s a very strong partnership, they’ve come through a lot of challenge on the west coast over those years, and both Stagecoach and Virgin are now looking to deliver a transformation on the east coast route similar to what they have delivered successfully on the west coast route.’
‘West Coast has got a strong track record of delivering for customers and leading the industry in many areas. What we’re trying to do here is just build on and enhance that.
‘The two businesses are in quite different places. They’ve got their fleet of new trains, that’s well established now, and for them it’s about growing the market and growing passenger numbers with that new fleet.
‘For us, we’re very much at the start of the journey, we’ve got the new trains to introduce so we’re in different places, but both routes offer us, as management teams, the opportunity to demonstrate what we can deliver in terms of the Virgin difference, and the difference that Virgin brings, and Stagecoach brings, to the two businesses.
‘So you can see, for us it’s about introducing the IEP trains in in a way that transforms the customer experience. For West Coast, they’re working on a number of customer service improvements, such as the customer information system at Euston, which is giving people enhanced information about how loaded the trains are and how loaded the carriages are. They’ve been able to launch the automatic delay repay system for customers. Each time, we’re looking for things that improve the experience that people have when they’re travelling by train.’
In recent years, East Coast has been one of the worst performing long- distance train companies in terms of adherence to the timetable according to the public performance measure (PPM) which records the percentage of trains which arrive within 10 minutes of their planned time. Surely this needs to be addressed as well.
‘The investment that we’re currently making is designed to address many of the failure modes that the existing fleet suffers from,’ David stated. ‘We do think there’s some stuff that can be done that will pay back over the next few years before the IEPs come in, and we can improve the PPM by doing so.
‘On the infrastructure, we’re now in the second year where Network Rail on the East Coast main line has delivered quite a significant improvement in terms of its performance to us. There was a major improvement in the delays from the infrastructure last year, and that’s continued this year.
‘We’ve got an alliance with Network Rail which provides a framework to explore those opportunities. One of the key ways to improve the reliability of the infrastructure will be when King’s Cross is remodelled. The current layout was installed in the 1970s. So we are quite vulnerable to infrastructure failures there, although the team does a really good job at keeping on top of them.
‘We don’t get many asset failures, but clearly that layout is not going to last that long, so it does need to be renewed in a way that reflects the acceleration curve of the IEP trains. If we can get some faster approach speeds and exit speeds, combined with the ERTMS signalling, then there’s some more journey time to be had there.
‘ERTMS is the first example of digital signalling being used in a large scale way in the UK other than HS1. So this package of improvements that we’re going to be making means it’ll look a very different railway in five years time than it does today, and we’ll be carrying a lot more people, and hopefully we’ll be satisfying many more customers.
‘One of the things we’ve found is that front line staff, front line employees, have absolutely embraced the Virgin approach to customer service. They haven’t needed much encouragement to do that, which has been great to see.
‘Keep the customers happy, then they come back.’
Featured image: David Parry/PA Wire.