Coronavirus: Rail franchise agreements suspended to avoid company collapses

Ganesh Rao, business reporter

The government has brought in emergency measures to provide refunds to ticket holders and prevent rail companies from collapsing due to the coronavirus pandemic.

The Department for Transport said it will suspend normal rail franchise agreements and take over all the risks as well as revenues for operating trains for at least six months.

Restrictions placed around travel over the COVID-19 outbreak has seen a sharp fall in demand for rail companies, leaving operators facing significant drops in their income

The government has also said anyone holding an advance ticket will be able to obtain a refund free of charge.

Season ticket holders will also be able to claim refunds on the portion of time still unused through their rail operators.

The transport department said it will continue to run trains on low frequency to allow key workers to commute to work but reiterated government advice for the general public to stay at home and avoid the spread of coronavirus.

Secretary of State for Transport Grant Shapps said: "We are taking this action to protect the key workers who depend on our railways to carry on their vital roles, the hardworking commuters who have radically altered their lives to combat the spread of coronavirus, and the frontline rail staff who are keeping the country moving.

"We are also helping passengers get refunds on advance tickets to ensure no-one is unfairly out of pocket for doing the right thing.

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The railways have already seen up to a 70% drop in passenger numbers as an increasing number of people work from home and adopt social distancing.

However, other services - including the Tube in London - are not seeing a decline as people use packed services to get to work.

The government said operators will continue to run day-to-day services for a maximum of 2% of the cost base of the franchise but warned that it will be far less than their recent profits.

Mr Shapps added: "These offers will give operators the confidence and certainty so they can play their part in the national interest."

It also said that in case operators choose not to take part in its "Emergency Measures Agreement", the government's Operator of Last Resort will take over the franchise.

The government is concerned that if operators were allowed to go bankrupt, it would cause significantly more disruption to passengers and higher costs to the taxpayer in the future.

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.

"The rail industry is working together so that people and goods can keep making essential journeys during this unprecedented national challenge, getting key workers to hospitals, food to shops and fuel to power stations."

First Group, which runs Great Western Railway, South Western Railway, TransPennine Express and Avanti West Coast said it welcomed the emergency measures taken by the government.

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It's chief executive Matthew Gregory said: "We welcome and have accepted the UK government's swift and comprehensive offer of emergency measures which provides certainty for all of the group's franchises and the continuity of our vital rail networks during this time.

"The health and safety of our people, our passengers and their communities is our top priority and across all of our businesses we are working hard to support the response to the growing pandemic, and closely following all government and health authority guidance."

Go Ahead Group, which runs the Southeastern and Govia Thameslink Railway as well as regional bus services said it was in discussion with the government over "financial and contractual support."

The company also said it was providing bus services to Transport for London (TfL) without any profit or loss to itself.

It said in a statement: "We have reached agreement with TfL that revenue will continue to be paid as contracted with variable cost savings being returned to TfL i.e. operating on a 'no net loss, no net gain' basis."