Train operating companies will continue to run services day-to-day for “a small predetermined management fee”

 

 
The Department for Transport announced this morning that it will temporarily suspend normal franchise agreements and transfer all revenue and cost risk to the government for a limited period, initially six months.

Britain’s train operating companies will continue to run services day-to-day for “a small predetermined management fee”. Terms and conditions of employment for rail workers will not change.

The DfT says that this will ensure that trains necessary for key workers and essential travel continue to operate. No other passengers should travel.

The railways have already seen up to a 70% drop in passenger numbers. Rail fares revenue has also reduced as people increasingly work from home and adopt social distancing, with total ticket sales down by two-thirds from the equivalent date in 2019.

The government says that its offer will minimise disruption to the rail sector during these difficult times.

Allowing operators to enter insolvency would cause significantly more disruption to passengers and higher costs to the taxpayer

“Allowing operators to enter insolvency would cause significantly more disruption to passengers and higher costs to the taxpayer,” a DfT statement explained. “The management fee will allow operators to act in the national interest in tackling Covid-19.”

Fees will be set at a maximum of 2% of the cost base of the franchise before the COVID-19 pandemic began, intended to incentivise operators to meet reliability, punctuality and other targets. The maximum fee attainable will be “far less” than recent profits earned by train operators.

In the event that an operator does not wish to accept an Emergency Measures Agreement, the Government’s Operator of Last Resort stands ready to step in.

Secretary of state for transport Grant Shapps said: “These offers will give operators the confidence and certainty so they can play their part in the national interest.”

Paul Plummer, chief executive of the Rail Delivery Group, which represents train operators and Network Rail, said: “The industry strongly welcomes the Department for Transport’s offer of temporary support and while we need to finalise the details, this will ensure that train companies can focus all their efforts on delivering a vital service at a time of national need.

“We would like to thank our people, who continue to do an incredible job in difficult circumstances.”

 
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