Rail funding row descends into food fight

Operator threatens to axe snack trolleys

(ALAMY)

A major rail operator is considering cutting services and onboard catering to save money, as ministers discussed temporarily renationalising some of Britain's rail network rather than allow struggling operators to alter their franchise agreements.

National Express, which operates the East Coast Main Line (ECML), is obliged to pay the Government £1.4bn for the right to run trains between London and Edinburgh until 2015, after winning the franchise at a time of economic growth and booming passenger numbers. Richard Bowker, its chief executive, told The Independent the company was now prepared to axe extra train services as well as snack trolleys and buffet cars after the Government made it clear it would force National Express to hand back the franchise rather than allow it to alter its agreement.

Mr Bowker said: "Everybody entered into these agreements in good faith in 2007 and there's been a major shock to the system in the meantime. Our catering service is a big loss maker that we keep because we think it is nice to have and part of the full-service philosophy, but that is something we would have to have a look at."

Several analysts have raised concerns over the ECML franchise, which catered for 18 million passengers last year. It is thought that there has been a big fall in the number of passengers travelling first class – an important source of income on the commuter route.

The Government's hard line on maintaining services and its refusal to give rail operators extra funding from the taxpayer has put some franchise owners in financial difficulties, with some analysts suggesting that the state will have to take back control of some routes.

Douglas McNeill, a rail industry analyst at Blue Oar securities, said: "There are certainly indications that the ECML is not in the happiest state. It's fairly clear now that some of the franchises awarded more recently have been based on quite optimistic assumptions about passenger numbers. Some of that optimism will be prove to be misplaced."

Yesterday, National Express slashed the dividend it will hand out to shareholders as it pledged to hold on to its rail operations. Mr Bowker said that there were "no plans whatsoever" to give up the franchise, and that the company still believes its rail division will make a profit this year. Should it have to default on any of its franchise payments for the ECML, National Express could be asked to give up the East Anglia and c2c franchises too.

National Express's admission that it would have to go on a cost-cutting drive was met by anger by rail unions. "National Express has already made huge sums of money on the back of massive fares increases, public subsidy and overcrowding and its plans to cut jobs and pare services to the bone are an insult and a disgrace," said the RMT union's general secretary, Bob Crow.

Gerry Doherty, leader of the TSSA rail union, said: "National Express's cost-cutting plans will be self defeating and end in disaster. By axing jobs, closing dining cars, cutting ticket offices and rationing first-class passengers' biscuits and water, they will only drive passengers away."

Five rail operators, which have not been named, have been given a "red light" by officials within the Department for Transport, indicating that they will struggle to meet the conditions of their franchise agreements.