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National Express takes root in Melbourne

01 Oct 2000

INTRO: In June 1999 Britain's National Express Group won three of the five passenger rail franchises in Victoria. Whilst geographically they couldn't be further away from the Group's five British franchises, the inheritance, the challenges and the ambitions are remarkably similar

BYLINE: Peter Strachan

Chief Executive, Australia Rail Division, National Express Group

ON AUGUST 29 1999 National Express Group took over the operation of three of Victoria's five rail-based public transport businesses. In its first year, NEG has laid the foundations for a substantial increase in the quality and patronage of three very different networks.

In the Melbourne metropolitan region, the electrified suburban services and the largest tram network in the Southern Hemisphere were each split into two operations for competitive franchising. National Express won Bayside Trains and Swanston Trams, along with V/Line Passenger, the principal operator of regional rail and road coach services across the state.

With over 138 million passenger journeys a year and around 2500 employees, these new additions have significantly changed the scale and scope of the group's profile, which now encompasses bus, rail, tram and airport operations in Britain, the USA and Australia. An Australian Rail Division was established in Melbourne to oversee the activities of all three businesses.

Our first task was to review the inheritance. Between 1991 and 1999, public transport use in Victoria grew by an average of just 1% a year. Public opinion had been negatively affected by successive bouts of industrial action, cuts in services and problems with new automatic ticketing equipment. Australia is also renowned for its love affair with the car. In Melbourne, 74% of all trips made are made by car, while public transport accounts for just 7% (most of the rest are cycling and walking).

It is therefore no surprise that public transport in Victoria has always needed government subsidies. In the year to June 30 1999, the state government provided A$204m for the three businesses we took over. Under the terms of the franchises, this contribution is due to fall to A$73m by 2009.

Bayside Trains will receive its last subsidy in 2010, and by the end of the franchise in 2014 it will have made payments back to the government totalling over A$40m.

Investment drought

A key aim of the franchising process was to stimulate investment in rail. No contracts had been placed for rolling stock in Melbourne for over a decade, and an impartial observer would quickly conclude that the trams and trains are old and tired.

The average age of a Bayside EMU is 16 years, while Swanston's trams average 20 years. Although V/Line's Sprinter DMUs are relatively new, the Z class loco-hauled carriages are over 40 years old. Infrastructure and stations have also suffered from an investment drought.

In terms of culture, Victoria's public transport spent its last few years of government control going through successive major changes. From April 1997 - when the state announced its intention to privatise - through to the August 1999 handover, the culture was one of bureaucracy, frugality and uncertainty.

On the positive side, while many cities are still developing an integrated transport system, Melbourne had already succeeded. With one ticket, passengers in Melbourne's city centre, suburbs and outlying areas over an hour away, can use one ticket and change between train, tram and bus as often as they like. Revenue collection is fully automated, with tickets available from over 400 automatic vending machines, from over 750 retail outlets, and on-board trams and buses.

Unfortunately, the system replaced train staff and tram conductors. Rightly or wrongly, it was blamed for both the loss of a human face to transport, and high levels of fare evasion.

Strategies for growth

Our strategy for the Australian Rail Division is centred on investment-led growth. More than A$200m will be invested in Swanston over its 12 year franchise to increase patronage by 40%. Another A$175m will be invested in V/Line over 10 years to increase patronage by 73%, and A$600m in the Bayside franchise over 15 years to lift patronage by 84%.

While these targets appear challenging, Group experience elsewhere has proved that they are more than achievable. The growth strategies include: