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INTERVIEW


David Horne, managing director Virgin Trains East Coast, talks to Paul Revel about why competition can only work on a level playing field


IN MAY THIS YEAR THE RAIL REGULATOR authorised First Group to compete on the East Coast mainline between London and Edinburgh, where Virgin Trains East Coast is the franchisee. The ten-year track access application ap- proved by the Office of Rail and Road (ORR) will enable First Group to operate from King’s Cross by 2021. I ask David Horne for his view on this


enforced competition. First, he points out that the East Coast main line has two open- access operations already: Hull Trains and Grand Central. “It’s been a route on which open access has operated for some time,” he says. “The point we’ve been making is this doesn’t really fit with the franchise system in terms of the charging policy. The open- access operators don’t make the payments to Network Rail and to the government that we do. We are not happy because it’s not a level playing field. The same is true of these Edinburgh services. This needs to be fixed.” Virgin Trains East Coast as franchisee pays


more than £4 million a week to the govern- ment plus a fixed charge to Network Rail, he says. “We also pay a per-mileage charge to Network Rail, a much smaller charge. The other operators also pay the per-mileage charge, but that’s pretty much all they pay. The DFT [Department for Transport] has said it wants this to change. It has expressed concern about abstracting revenue from the franchise. That’s a cost that ultimately falls to the taxpayer.” So if costs were spread in a fair manner, would Horne be supportive of a competitive


marketplace? He asserts the East Coast main line is “hugely competitive” already, and says the company’s two owner groups, Virgin and Stagecoach, are used to operating in very competitive markets. It’s also important to recognise that the


franchise agreement is about a much wider programme, he says. “The East Coast main- line is now going through the transformation that took place on the West Coast mainline back in the Noughties. That’s clearly had a lot of economic benefit for the country.”


TRANSFORMATIONAL CHANGES The franchise holder has to be mindful of maintaining ability to make the “big trans- formational changes” that are a key part of the agreement, says Horne. “The regulator has to promote investment into the railway, as well as promoting competition.” I point out that many people say the


franchise system itself needs reforming. “Ultimately, the system is a matter for the government to decide. Virgin and Stage- coach have said that, for long-distance routes, a system of licensing train operators, who might compete together on particular routes, should be considered.” What’s the difference between licensing


and franchising? “Licensing would es- sentially be a system where the licensees bid for packages of slots, a bit


like


how airlines do,” he says. “The details would clearly need working through. You would need to consider how to ensure promoting investment and protect socially necessary services.”


The regulator has to promote investment into the railway, as well as promoting competition


BUYINGBUSINESSTRAVEL.COM


Virgin’s new Azuma trains are being manufactured by Hitachi in County Durham, and will increase the operator’s fleet size enabling it to expand operations in line with the ORR’s approval of new services: Virgin can run new services to Bradford, Lincoln and Harrogate from May 2019, and Edinburgh and Middlesbrough from May 2021 (or earlier, if rolling stock becomes available sooner). “Our plan is to increase the number of


services we run from 155 a day currently, to just over 200 a day – up by about a third,” says Horne. “We look to use these trains not just for the obvious city-to-city journeys, like Newcastle to London, but also what we can add to the network. Take Middlesbrough for example: it’s a big place, but it’s not got a direct train service to London. Our objec- tive there is to really support the ongoing economic development in the Tees Valley.”


COMPETING WITH AIR An important aspect of the Azuma trains is reduced journey times, because they ac- celerate faster. Edinburgh-London should be reduced by 20 minutes to four hours. Overall journey times have always played a key role in competition for share of domestic business travel. “We know from experience, from Virgin Trains on the West Coast, where journey time has been cut on the Glasgow- London route, that if we can get times down, we can attract some switch of customers from air travel,” says Horne. He adds that the main route where Virgin is looking to increase business travel is Edinburgh-London: today, its market share is only around 30 per cent, and the operator’s goal is around the 50/50 mark. Horne says increasing frequency – Virgin added 22,000 seats a week earlier this year – is another part of the strategy, along with enhance- ments, such as free wifi in standard class and revamped menus by TV chef James Martin. And in June, Virgin Trains launched the ‘Railblazer’ corporate booking portal for SMEs (see News, p6). “We’re really starting to build activity to reposition rail as a more viable alternative to air on the Scotland- London route,” he says.˜


David Horne was appointed managing director of Virgin Trains East Coast in March 2015. He was previously managing director for East Midlands Trains. He joined the Stagecoach Group in 1998, and led its successful franchise bid for East Midlands Trains in 2007. Horne grew up in Cornwall, read Transport Management at Birmingham’s Aston University, and now lives in Nottinghamshire with his wife and their two young children.


BBT JULY/AUGUST 2016 31


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