A new guiding mind for rail

The organisational structure of the UK's railways is no longer working. Passengers have endured 18 months of turmoil, culminating in the May timetable chaos. Secretary of State Chris Grayling has ordered a "root and branch" review.

Rail needs a new guiding mind, a recent Transport Times round table discussion (held in collaboration with SAP and IBM) heard.

The wide-ranging discussion, on A Strategic Direction for Rail, brought together senior figures from the industry, including operators, the regulator, and suppliers. Network Rail chair Sir Peter Hendy CBE supplied the keynote address, with Transport Times chief executive David Begg chairing the meeting.

And with Mr Grayling having indicated at a Conservative Party Conference fringe event that the DfT wants to step back from direct management of the railway – he said he expected the DfT "to be doing less" after the review – there was a widely held view that this presents a huge opportunity for the industry to press the case for the structure it wants to see.

Factors that had led to the current situation included the abolition of the Strategic Rail Authority in 2006, which had led to micromanagement by the DfT. Organisation of the railway network was contrasted with that of TfL, a strategic, integrated transport authority with a long-term plan and a mixed economic model. Informed by market research into what customers want, it was held up as a long-term success. In the capital, who owned the operators running the services had ceased to be an issue.

It was felt that the options available to John Lewis deputy chair (and ex-Chief Executive of British Airways) Keith Williams, who will lead the review, were limited. Re-creating British Rail or continuing with the current structure were not options; vertically integrated regional companies would not be likely to attract investors. A strategic body along the lines of TfL could be the best option, it was argued.

Franchising, the participants felt, had been broadly a success but now DfT specifications are too detailed and prescriptive, and there is little incentive for operators to invest. On the question of franchising versus open access, it was considered that the network was too full to allow inter-city services to go over to open access completely, with operators bidding for slots. It was felt that there was room for franchising and open access to co-exist, but the imbalance in the current pricing regime for track charges needed to be corrected.

Some held the view that there should be different types of franchise for different markets such as intercity or regional rail. On routes such as the Brighton and Great Western main lines there were conflicting priorities between commuter, intercity and Gatwick or Heathrow Express services.

However, the view was that the exit of National Express from the franchising market did not signify that, in general, the risks of franchising were too great for the rewards.

On decision-making at the DfT, the view was that almost all decisions appeared to have to be referred upwards to ministers. Decisions had to go through seven levels of approval. Slow decision making at the department had contributed to the May timetable meltdown.

An integrated approach to carrying out major projects was needed, it was argued. On the Great Western main line, the department had ordered the new Intercity Express trains, while Network Rail had separately designed the electrification scheme, without consideration of services or a timetable.

It was pointed out that Network Rail was on the point of a major reform, separating it into "properly constituted route businesses". The current periodic review to specify investment for the next five-year control period starting in 2019 had been undertaken on the basis of proposals from the new businesses. There would be genuine devolution with clear targets.

For train manufacturers and their supply chain, there had been a glut of new rolling stock orders, but it was felt there was now a need for consolidation. It was pointed out that, by itself, modern rolling stock did not guarantee efficiency of service.

SAP Global Vice-President Jonathan Rhodes said that for the railways, the outcome being sought, customer satisfaction, should drive the strategy, and then the business processes should be designed end-to-end working from the outcome. Anne-Marie Scott, SAP Director for Services Industries for the UK and Ireland, added that the use of data could help keep politicians and customers happy at the same time.

Concern was expressed about the complexity of the rail fares system, by comparison with TfL's Oyster and contactless system, which people trusted to charge them automatically the lowest fare for the journeys they made. The TfL system, it was pointed out, was the result of 30 years of evolution, beginning with the overlay of a zonal system over a complex point-to-point structure during the 1980s. This had made it possible to progressively add season tickets, multi-modal tickets, smart cards and contactless payments, while the original point-to-point system eventually became redundant and could be removed. But this would be difficult to replicate with the national rail fares system because of difficulties concerning "winners" and "losers" under a new system and the complexity of apportioning fares.

Some operators wanted to introduce a digital wallet for fare payment, but the cost was too great under the franchise system. Meanwhile bus companies had been able to introduce contactless payment because they were self-contained entities.

Some of the participants felt that airlines managed capacity more effectively than rail operators, whereas rail suffers from too many people travelling at peak times. IBM UK Travel and Transport Industry Leader Alan Musgrave said that airlines were using data in a very intelligent way, applying cognitive analytics. One company had used this approach to drastically reduce the cost and improve the efficiency of dealing with delay repay claims. Another was generating incremental revenue from selling auxiliary services such as train tickets, Uber rides, or online shopping delivered to the boot of the passenger's car in the airport car park, based on analysing customer profiles.

There was some discussion about offering passengers incentives to travel at less busy times, and it was pointed out that during the 2012 Olympics TfL was able to influence and change travellers' behaviour just by supplying reliable information about likely delays and the options to avoid them.

Regarding the Williams review, many of the participants had lived through a number of rail reviews and there was some doubt about whether it would achieve anything. There was a view that by the time the review reported, the secretary of state might have moved on and the findings watered down or forgotten. Others pointed out that rail timetable changes recur at six-monthly intervals. The civil servants who had had the traumatic experience of May would still be there and would want to drive change through.

Another view was that it was up to the rail industry executives gathered in the room to take the initiative and solve the current problems themselves.