Regulator steps in to settle battle over who runs trains

Randeep Ramesh

Transport Correspondent

The rail regulator, John Swift QC, will settle the first fight for slots on Britain's privatised rail network later this month.

South Wales and West, run by former bus executives at Prism, and Virgin's Cross Country have both put in proposals to run trains from Penzance to Manchester and Portsmouth to Liverpool this summer.

However, the number of train "slots" mean that only one company will succeed. Virgin, which already runs a direct service, claims that SWW will not be able to generate enough ticket sales on the Manchester to Penzance route to warrant a train, and points out that passengers can already use the route on SWW if they change at Newport.

SWW has hit back, saying that its plans would allow travellers from Shrewsbury and Hereford to use the Manchester link. The rail regulator, who rules on competition issues, was asked to intervene after the matter could not be resolved through arbitration.

He will also have to give a verdict on SWW plans to run "in the near future" a Manchester to London Waterloo service, which is also contested by Cross Country.

What is not in dispute is that the new services would generate revenue for train companies because of the way passenger proceeds are divided up between operators. The system, called the Orcat model, dishes out revenue to operators that stop at certain stations - regardless of how many passengers a train might pick up.

Competition for the nation's rail revenue between train operators has meant many companies are lining up to snatch rivals' traditional station stops from them. Commuter towns such as Huntingdon in Cambridgeshire are being targeted by railway operators, as any train stopping there would be entitled to a slice of the substantial revenue generated.

Although figures from Association of Train Operating Companies, which represents the interests of all the 25 operators, show that there has been an 8 per cent "real" increase in passenger revenue to pounds 2.7bn, many managers have set ambitious targets to make money for their companies. The issue could prove tricky for Labour ministers who opposed the splitting up of British Rail.