Govia has secured an extension to up October 16 2021 with an option to extend at the DfT’s discretion until March 31 2022. First will continue to operate Great Western Railway (GWR) services until March 31 2023 with an option for a further year extension.

The agreements ensure continuity of operation and will run concurrently for at least six months with the DfT’s Emergency Measures Agreement (EMA) introduced last week in response to a dramatic drop in passengers following the coronavirus outbreak. Under this arrangement the DfT takes over the franchisee’s revenue and cost risk for at least six months while operators are paid a fixed management fee with the potential for a performance-based fee.

The new Southeastern agreement will see the operator introduce a range of customer service improvements, including exploring ways to boost capacity in the short-term as additional rolling stock becomes available and a continued partnership with infrastructure manager Network Rail to develop a longer-term capacity, rolling stock and punctuality strategy for the Southeastern network beyond 2022.

The Southeastern network comprises commuter and long-distance from London to Kent and parts of East Sussex together with suburban services in southeast London as well as domestic high-speed Javelin services via High Speed 1 (HS1). Govia has operated the franchise since 2006 and the current contract commenced in June 2019, which was subsequently extended to April after the government cancelled the refranchising competition in August 2019. Punctuality has increased by nearly 10% in the last two years while customer satisfaction hit a six-year high of 81% in the most recent National Rail Passenger Survey.

Under First’s agreement with the DfT, GWR will operate services as a franchise at the conclusion of the EMA with revenue risk shared with the DfT through a forecasting revenue mechanism (FRM), which also makes provision for a revenue rebasing exercise as required. The operator will also introduce a new Service Quality Regime and has agreed customary profit share arrangements with the DfT.

The Great Western franchise provides long-distance services from London to South Wales and the southwest of England, local and regional services in southwest England as well as commuter services in the Thames Valley. First has operated the franchise since 2005 and secured a year extension to its current direct award contract in November 2017.

GWR has introduced a fleet of 785 new coaches since 2015 and introduced faster and more frequent services on the network in the December 2019 timetable.

Among the improvements set to be delivered by GWR under the new contract are the planned introduction of additional capacity around Bristol and Exeter with extra trains set to provide thousands of extra seats. In addition, increased funding will help to improve services for local communities and at stations, while a combination of new flexible ticket products will be available for customers who do not commute to work every day, such as discounted part-time season tickets and the extension of paperless pay-as-you-go schemes. 

FirstGroup, as parent company to GWR, will provide subordinated contingent loan facilities of £10m (£5m of which is bonded) and a performance bond of £10m to GWR, as well as a cash-collateralised season ticket bond of around £35m. First says a wide range of scenarios were considered as part of the modelling to assess the award, including with respect to pensions, passenger demand and to the risk sharing mechanisms provided by DfT. It says that the Board of FirstGroup is of the view that there is an appropriate balance of risks and rewards in the agreement.

“In the longer term this new agreement will mean that customers can return to rail as their preferred choice of travel; with more seats, more services, better stations and more flexible ticketing to help reconnect the people and communities we serve,” says Mr Matthew Gregory, FirstGroup chief executive.