Open access operators are at a crossroads, government must choose a direction
Open access operators are at a crossroads, government must choose a direction
First published in Rail Business Daily.
Open access operators are at a crossroads and the government needs to signpost the future direction of travel in its consultation on the Rail Reform Bill, expected to be published this month. Will government champion new open access as part of its nationalised system or will it slowly suffocate the existing operators by failing to create the right safeguards?
The last 18 months have been a breakthrough period for open access operators as the benefits they bring to customers have been increasingly recognised. Open access operators create new travel opportunities especially for underserved communities, support economic growth and encourage a shift to greener transport options, such as Lumo increasingly attracting passengers away from flying between London and Edinburgh. They also promote fares competition, with evidence showing lower fares on the East Coast Main Line due to competition between open access operators and state-owned LNER. And, importantly for taxpayers, they receive no government subsidy.
Since Rail Partners’ Open Access Summit in November 2023 that brought together government and industry to discuss growing the potential for open access, the Office of Rail and Road (ORR) has taken positive steps to help improve the process for identifying, applying for and evaluating open access applications. It has improved transparency around the use of access rights, set out new guidance to support applicants, taken a more structured approach to managing complex and competing applications, and is due to begin quantifying the wider benefits of open access operators as part of its decision-making, such as social and environmental benefits. We welcomed these developments in Rail Partners’ recent response to the ORR’s consultation on new summary guidance for open access.
In recent months, the ORR has also approved access rights for a new service between Stirling and London, and for a co-operatively owned train operator, Go-op, to run trains in South West England. On the East Coast Main Line, existing operators Grand Central, Lumo and Hull Trains have shown strong passenger growth. And FirstGroup, the owning group for Lumo and Hull Trains, set out in its latest financial results that growing open access remains a strategic priority for the company, as it moved to add the nascent open access operator, Grand Union Trains, to its portfolio.
Open access operators are also increasingly offering benefits for travellers across Europe, encouraging modal shift and incentivising passengers onto rail. Independent research, commissioned by Rail Partners, showed that harnessing on-rail competition in Europe has led to more customers, more services, newer trains, cheaper fares and reduced subsidy. In Italy, competition between Italo and Trenitalia has seen passenger numbers between Rome and Milan grow by 90%. In Spain, Ouigo and Iryo competing to take passengers from Madrid to Valencia were seen to have fares 50% cheaper than non-competed routes.
Perhaps most importantly, since the UK’s general election in July, the new government has confirmed its support for open access operators in the private sector, despite its rail renationalisation agenda. It is a very positive sign that the Prime Minister personally visited the Hitachi factory in Newton Aycliffe to support a deal to manufacture new trains for FirstGroup’s open access services.
However, despite all the positive developments in recent months, it remains unclear whether the new government is a champion of open access operators, or it is simply tolerating them as part of the system that is too costly to nationalise. If the Government doesn’t make a positive choice to grow the sector through adequate safeguards and a fairly-adjudicated application process, it will effectively be creating the conditions for existing operators to wither on the vine. The Secretary of State’s letter to the ORR on Monday (6 January) is a worrying signal in this regard as it suggests that the bar for new open access applications is being made harder to clear.
As government develops its proposals for rail reform, it should recognise that the creation of Great British Railways (GBR) as a near-monopoly provider of track and train could pose a threat to the future growth of open access. Where capacity exists on profitable routes, GBR will have a direct incentive to prevent a rival operator using the space in the timetable to deliver a service that benefits passengers, rather than open itself up on-rail competition.
More broadly, the experience of new entrant operators across Europe has shown that national monopoly operators have a tendency to undermine competitors, such as offering inferior slots in the timetable, cross subsidising their own passenger operators to offer unsustainably low fares or limiting access to retail and ticketing systems.
If government is serious about promoting open access and the benefits it brings for passengers, it must use the upcoming legislative consultation on its rail reform bill to create a framework that actively champions it and maintains a strong regulator to give protections to non-GBR operators – freight and devolved operators as well as open access. That needs to include a fair access regime with the power for the regulator to direct GBR to offer access to the network. Without such safeguards built into the system, there is a high risk that GBR as a public sector monopoly will be instead incentivised to prioritise its own interests.
Government should also signal clear support for the significant number of applications for new or expanded open access services currently under consideration by the ORR. These would offer extra benefits to passengers from all three existing operators on the East Coast Main Line with additional station calls by Grand Central and an extension of Lumo’s Edinburgh service to Glasgow. Also in the pipeline are new services proposed by Virgin and Lumo on the West Coast Main Line and several other proposed routes across the UK.
Open access operators are at a crossroads. There is momentum across Europe in favour of this model. But passengers will only benefit if government chooses the right direction.