Rail fares and franchises (HC 233-i) Transport Committee 4 Feb 2009

Evidence given by:
2.45 First Group Paul Furze-Waddock, Commercial Director, UK Rail
National Express Group David Franks, Managing Director, Rail
Virgin Trains Graham Leech, Commercial Director
Southeastern Charles Horton, Managing Director
First Hull Trains Jim Morgan, Passenger Development Director for First Group
Association of Train Operating Companies (ATOC) David Mapp, Commercial Director
3.30 Passenger Focus Colin Foxall, Chairman Mike Hewitson, Head of Policy
London TravelWatch Sharon Grant, Chair Tim Bellenger, Director, Research & Development
thetrainline Richard Rowson, Business Development Director
4.15 The National Union of Rail, Maritime and Transport Workers (RMT) John Leach, President
Transport Salaried Staffs’ Association (TSSA) Gerry Doherty, General Secretary.

Q50 Mr. David Clelland: I was wondering whether, from what was being said earlier about the level of fares and the various options which are now available for cheaper fares, it has given rise to an indication from general customers about their satisfaction. Do you get an indication that customers are generally satisfied with the levels of fares, the fare structure and the general journey experience these days?

Mr Bunting: Overall, for National Express East Coast, in the last 12 months as we have taken over the franchise from GNER - which was in a bit of a poor state - we have increased our overall customer satisfaction by 6%.

Q51 Mr. David Clelland: How have you measured that?

Mr Bunting: That is measured through a rolling passenger survey the whole industry does. It is taken by an independent third party, administered by Passenger Focus, and that is reported back to us. We have therefore moved that on by 6% over the last 12 months, which is great. A lot of that is the fact that we have taken punctuality - which is really what the customer wants - and driven that from about 81 to over 86%. In the last few weeks we have run the first 100% punctual days that the East Coast main line has seen since it was privatised. We are prioritising punctuality, reliability, which is what the customer wants, and that is coming through in some really encouraging customer satisfaction figures.

Q52 Mr. David Clelland: Is that a general feeling amongst train operators, that the customers are happy with the situation?

Mr Furze-Waddock: It is. Overall satisfaction on Great Western has lifted significantly over the last year, to a level of 80% now. With FSR - First ScotRail - similarly, but 90%. First Capital Connect and TPE are flat. Within that, it would be no secret that surveys on value for money are not as good, but a significant driver of that has been in the past the performance, which is demonstrably improving across the industry. The other factor which the Passenger Focus survey has recently highlighted is the feeling of overcrowding; that is a big driver of a customer’s feeling of satisfaction with value for money. All of us are working very hard at the moment with the department on schemes to deliver additional capacity. Some operators have recently significantly increased capacity. First Capital Connect is increasing capacity from May on the Cambridge route by 15%, and we are all bidding to the department at the moment for additional rolling stock through the HLOS mechanism. We are, in all of our franchises; and they are all targeted to improve those key flows where we are suffering the most overcrowding.

Mr Mapp: Through the National Passenger Survey, the most recent wave of which was published by Passenger Focus last week, overall satisfaction across all train operating companies had increased to 83%, which was the highest level recorded since the survey began in 1999. I therefore think that there is clear evidence that customer satisfaction at the moment is good. Clearly we can always do better, and it should not be inferred as reflecting any degree of complacency.

Q53 Mr. David Clelland: Yes, but, Mr Mapp, as you pointed out to the Committee before, we can only do better on the railways apparently if either the taxpayer pays more, the fare-payer pays more, but profits have continually to increase.

Mr Mapp: Profit margins have remained remarkably stable and, if anything, have indeed declined over the year; so I think that point needs to be put into perspective. Clearly it is in all our interests. We only make profits because we provide a good service that customers want to use. I think those National Passenger Survey numbers indicate that we are doing that. It is also reflected in the huge growth in usage of the network over the last 12 years. Whilst we are not complacent and there are still clearly areas for improvement, the evidence - evidence that comes from an objective source, Passenger Focus, and we are not involved in that research - suggests that customer satisfaction at the moment is at good levels.

Q54 Mr. David Clelland: I used to work for a private industry. I never wanted it to make a loss, I have to say, and I am not suggesting that private train operators would want to do other than make a profit; it is a question of whether we have got the balance right, and that is what the Committee is trying to get down to. Could I ask Mr Bunting, did National Express overstretch itself when it bid for the franchise for the East Coast line?

Mr Bunting: We put in a bid. It was not the highest bid.

Q55 Mr. David Clelland: With the light of experience, was that a realistic bid?

Mr Bunting: At the moment we are seeing growth; our customer satisfaction levels are rising; our punctuality levels are rising, so we have every reason to have real confidence with the franchise.

Q56 Mr. David Clelland: No problems with the franchise on the horizon at all?

Mr Bunting: We are looking forward to making even further improvements for it, yes.

Q57 Mr. David Clelland: So you do not think that perhaps you might have given rise to expectations which you have not been able to live up to?

Mr Bunting: No, not at all.

Q58 Mr. David Clelland: There is to be no deterioration in the service at any level?

Mr Bunting: We took over a business that needed some TLC and some hard work, and we have been doing that. As I say, the results we are seeing so far - we have really focused in on getting the trains to run on time, and that is going extremely well at the moment.

Q59 Mr. David Clelland: We had a small inquiry of our own in the North East before the franchises were let, and your representative there was making all sorts of indications that there would be improvements, including additional services, reduced journey times; that there would be improvements in catering services. You are satisfied that all of these things are going to go ahead, as far as you can see?

Mr Bunting: We still have our plans to improve the franchise. We are waiting on the final conclusion of the RIR report on our increased service levels, for which we got some real encouragement last week. The rights for our Leeds services have been firmed up. We have the opportunity now to work with Government to push through those improvements that we talked about when won the franchise.

Q60 Mr. David Clelland: Can all of your staff then be satisfied that they can look forward to job security for the next few years?

Mr Bunting: I do not think that anybody can look forward to job security for any length of time at the moment. I do not think that is a credible option.

Q61 Mr. David Clelland: Notwithstanding the recession. I understand that. I have to say that does not seem to be affecting the railways too much, in terms of the numbers of people who are travelling and the kinds of profits which are being made. For instance, are the catering staff able to look forward to a secure future as far as the East Coast line is concerned?

Mr Bunting: Yes, we are continuing to provide an excellent catering offer, which undertake more food-to-seat rather than putting people in restaurant cars, which frees up more space. We are trying to reflect healthy options, healthy eating, people wanting to change the way they eat on the go; so we are looking at the whole catering process, to make sure it is what the customer needs; and we are making some changes in terms of how we deliver the product to people.

Q62 Chairman: Is that accurate, Mr Bunting, or is that a euphemism for cutting back on catering?

Mr Bunting: No, it is not a euphemism at all. If we do not have satisfied customers, we will not grow our revenues; we will not maintain our profits. Everything we are trying to do is to make a journey on National Express services a more enjoyable one and to get the value-for-money scores higher. We will not do that by not giving people the things that they want when they travel with us.

Q63 Chairman: That does not ring quite true. You do not exactly have a choice of catering when you are on a train, do you?

Mr Bunting: A lot of people go to Pret or they go to Costa before they get on the train; so we want to try to make them buy with us when they are on board. We need to improve. We need to improve the quality of their coffee to compete with what has become a bit of a high street success story; so we have to work hard to make sure our standards rise to meet the expectations of the customer that they are now getting on the high street.

Q64 Chairman: Have Virgin cut the catering?

Mr Leech: No, we have not. For our new service we have made some changes to the type of service that we are offering or the type of food. What we have actually done is to spend more money on it; so the amount of money we are spending on our food has gone up. In a similar way to National Express, we are making more commitments to providing organic food in first-class, locally produced. What we have done is invest more in it. We have introduced a very good sandwich offer in first-class during the middle of the day, which is having an extremely good response from customers, as being more what they want.

Q65 Mr. David Clelland: So we have happy customers, happy staff, good profit levels. I wonder why we need to have this inquiry at all! Everything seems in the garden seems to be rosy.

Mr Mapp: We are not complacent and we clearly have a lot of things that we need to do to improve, and my colleagues have already illustrated some of those areas. We are not complacent. Nevertheless, the objective evidence from the National Passenger Survey is that overall, across the network, across all passengers, there is a reasonably high degree of satisfaction.

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Q92 Mr. David Clelland: Are any of you on the Government’s red light list? No one has any idea about that?

Mr Leech: Not that we know of.

Mr Mapp: Well, we were interested to hear about the red light system in the press last week. The DfT did not make it clear which, I think it was, five train companies, they said, which were categorised as being red light, they did not actually specify which train companies those were, and we honestly do not know which five train companies those are.

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Q104 Mr. David Clelland: But you represent all of the train companies, do you not?

Mr Mapp: Yes, I do.

Q105 Mr. David Clelland: So, so far as you are aware, it is not likely that any of them is going to be in trouble as a result of the recession and you have not had any discussions with any of them about that?

Mr Mapp: At the moment, I have no information at all that any train company is in financial difficulties.

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Q123 Mr. David Clelland: I know we should not always believe everything we read in the newspapers, but with reputable newspapers there is generally something behind the story. I wonder if Mr Bunting has seen this morning’s Newcastle Journal which has an article about projected problems that there might be with the franchise of the East Coast Line, suggesting that Richard Branson might have an interest in taking it over. Where has that story come from?

Mr Bunting: I think Mr Branson gave a personal view which his company have refuted, so I think we will just put that one down to Richard’s style. I have spoken to the author of the Newcastle Journal article this morning, but he has not shared with me exactly what is in there. No, it is just a little bit of mischief-making there, I think, from our friends at Virgin, or our friend at Virgin.

Mr Furze-Waddock: From FirstGroup’s point of view, we are not talking about cutting services either. Indeed, as I said earlier, we are actually bidding on the three UK or English franchises. We are bidding for additional capacity in First Capital Connect and Great Western, and we are looking for additional trains, additional resources, and we are actively doing that at the moment with the Department.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.