Contracted premia for the franchises awarded so far
3.3 The three franchise agreements awarded so far require operators to pay the Department over the life of the contracts, 82% more than it estimated it would have received had the previous franchises continued (Figure 4 overleaf).7 This does not necessarily mean that similar levels of returns will be achieved in all future competitions. Operators' actual payments to the Department may change if, for example, infrastructure works result in disruption and reduced revenue, or if revenues exceed projections.
| Figure 4 Anticipated versus comparator premia Total financial premium for three franchises using anticipated and comparator projections
Notes 1 The comparator premia uses the Department's long term forecast model, which projects current performance into the future for the duration of the new franchise. 2 Figures are in nominal terms at the time the franchises were awarded. Source: National Audit Office analysis of Department for Transport information |
Anticipated
Comparator
Difference3.4 A number of factors contribute to these results. For example, passenger demand, which is linked to revenues and therefore franchise premia, has been increasing for many years. In addition, the three franchises awarded so far all include commitments to increase the number of seats through new, higher-capacity and more frequent trains. The Department expects these will allow more people to travel and increase fare revenue for operators.8 The Department expects there to be 3,100 additional seats in the morning peak into London on the InterCity East Coast franchise, 10,000 extra on Thameslink, Southern and Great Northern and 25,000 more on Essex Thameside.
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7 This is based on the Department's own internal comparator model, which forecasts the likely payments from the franchise if the existing franchise continued. This does not include the Department's assessment of what bidders might offer.
8 The Thameslink, Southern and Great Northern, and InterCity East Coast franchises are benefiting from new trains that the Department has procured through the Thameslink and InterCity Express Programmes.