On November 13, the government takes over the control of the East Coast rail service from the National Express and the franchise will be hold until 2011. Next year the government will begin searching for a new operator. The winning bidder will receive the franchise. The line goes from London to Edinburgh. The train transports 17 million passengers and gives work to 3,100 employees a year.
The National Express did a lot of efforts to take over the train line in 2007. The revenues were decreased because the company was hit by the credit crises. Thousand business travellers switched from first to standard class and other passengers travelled off-peak to pay less. The company had also difficulties with their payments to the government. They weren’t capable to pay the high premium in order to win the contract.
The company tried to change the terms of the contract with the government, but the result was negative. So the government decided to re-nationalise the service. The takeover wouldn’t affect any employees, the services would continuous without interruption and the already bought tickets would still be valid. The Department of Transport expected to make a profit because the service is not longer obliged to pay a premium to operate the franchise.
The board of National Express has come under pressure of the shareholders because they weren’t informed about the takeover.
I have a separate opinion about this subject. It’s a smart decision of the government to take over East Coast rail service from the National Express. The company had financial problems because their revenues were decreased and they had also difficulties with their payments. If the government didn’t take over the rail service, there was a chance that a lot of people will lose their job. But now the takeover wouldn’t affect any employees. But on the other side, the re-nationalise is not the solution. In my option, the rail service should become part of the new London Overground Network.
I hope that the government would found a new operator within 2 years. Now with the financial problems, it’s difficult to found a new investor.
5 November 2009
Source: http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6904034.ece
woensdag 11 november 2009
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I agree with Gerty. A nationalisation of a company is always a difficult decission for a government. Should they invest money in saving the company or just let it be? I believe that governments need to decide wether the company is worth the cost. For big companies, that play a crucial role for the economy, I think the government should make an extra effort.
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