EXPRESSIONS of Interest to operate the UK's InterCity East Coast franchise were invited by the Department for Transport on December 15. Submissions are due by January 15, with the aim of having a new operator in post within 12 to 18 months.
As an interim measure, existing operator GNER will continue to run the routes from London to Leeds and Edinburgh under a temporary management agreement.
The announcement marks the termination of GNER's ambitious franchise agreement which started on May 1 2005 (RG 5.05 p242). This was predicated on revenue growth of 8·6% per annum, and it had become clear by August that this was not being achieved.
Sea Containers Chief Executive Bob Mackenzie said 'while we are not in breach of the current franchise agreement, GNER will not be able to meet the significant increase in franchise premium obligations due from May 2007. We would have preferred a renegotiation of the current contract, but that was not available.'
Secretary of State for Transport Douglas Alexander reiterated that 'the government has made it clear that rail operators that fall into financial difficulty should expect to surrender the franchise and not receive financial support.'
Under the agreement, DfT has set a 'realistic' revenue target, and GNER will receive an incentive bonus if it exceeds that target. A performance bond will remain in place 'to ensure GNER's continued performance'. The agreement can be cancelled at two months' notice from the end of September 2007 to enable a smooth transfer to any new operator. GNER has also agreed to fund all of DfT's costs in re-letting the franchise.
