New rail service is in response to Crossrail competition threat

Heathrow Express is to lobby the Department for Transport to operate on the proposed Western Rail Access link from the Great Western Main Line to Heathrow in competition with the next Great Western franchise or as the DfT’s preferred operator.

The move will form part of the Heathrow Airport Holdings-owned company’s plans to reconsider its business strategy due to impending competition from Crossrail services in 2018. At that point, Crossrail will take over the existing Heathrow Connect stopping service run by HEx and First Great Western. Crossrail’s new rolling stock, direct access to central and east London destinations from Heathrow and the expectation that it will offer substantial reductions on current rail fares to the airport will provide a significant competitive threat to Heathrow Express’s non-stop premium service from Paddington to the airport.

HEx managing director Keith Greenfield said operating on the WRA was “a crucial strand in the plan to secure the future of Heathrow Express”. It is understood HEx believes business could be affected by Crossrail to the extent of needing to reconsider the viability of its premium service. The termination of the existing Heathrow Connect operation will also mean HEx needs to find a new use for
that new rolling stock, with a Reading-Heathrow service among the possibilities.

In making its case to the DfT, HEx will need to overcome the department’s intractable opposition to date to competition to its franchises from open access operators. It will aim to win support by highlighting its record in operating dedicated services to the airport over 15 years, and knowledge of the onboard facilities and service needed to cater for the air-rail market. HEx is currently the top operator in the National Passenger Survey with 96% satisfaction.

Its campaign will also attempt to counter perceptions that it has used its position as a monopoly operator to charge high fares. Latest available results show that in 2012, HEx made an operating profit of £24m on revenue of £116m at a margin of 21%. However, the company will point out that its £21 single fare is less than half the price of a taxi journey from the airport to Paddington and significantly quicker. In addition, it will make the case that competition would help ensure a keener focus on service quality and pricing than if the DfT’s specification of the next franchise envisaged Great Western as the sole operator.

The company said a future Reading-Heathrow service would not necessarily attract a similarly high premium price as fares would be set to respond to the competitive situation.

“Our tickets would be priced to encourage people to use our service – as competitively as possible compared with alternative modes of transport. Savings from through-ticketing partnerships with other travel companies would also be fed into our prices,”

If the DfT does not support its plan to operate the link, HEx said it would make a competitive application to the Office of Rail Regulation. “We will pursue all options necessary to secure the option to run our services on the new western spur,” a spokesman told Passenger Transport.

This article appears inside the latest issue of Passenger Transport.

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