Case study: Transport

Commercial strategy for one of the bidders of a UK rail franchise

The Problem: Developing a 15 year, £20bn commercial strategy

The franchise is one of the largest in the UK, with passenger revenues in excess of £750m, carrying over 90m journeys per annum. The franchise was being let for 15 years, with bidders exposed to full revenue risk throughout this period

The franchise faces considerable challenges, with very high levels of overcrowding on key routes, the "highest fares in Europe" and low levels of customer satisfaction. However, a successful bid would have to be predicated on continued volume and revenue growth

As a (mostly) intercity TOC, there is a high correlation of demand to GDP and Disposable Income. The new franchisee would be exposed to considerable uncontrollable revenue risk dependent on the speed of the economic recovery, only partially covered through the DfT GDP Support mechanism

The new franchisee would be responsible for managing the business through a period of massive change, including major engineering work, the introduction of a new timetable and high speed fleet and the transfer of services to Crossrail. Bidders had to assume revenue risk throughout the disruption and forecast the revenue uplift from the service changes

The Approach: Revenue forecast and business case development

Credo was responsible for leading the Commercial and Revenue Workstream for the bid of one of the short-listed providers, and for presenting these forecasts to senior management

Our role included development of revenue forecasts for the 15 year franchise, including the development of fare and revenue management strategy, the analysis of marketing and customer acquisition proposals and the quantification of customer service, revenue protection and network development initiatives

We led the development of the business case for all revenue-generating initiatives

We were responsible for the Fares and Marketing delivery plan and supported the development of three other delivery plans

The Credo project lead reported directly to the Bid Director and managed integrated teams sourced from Credo, an engineering consultancy and internal resources

We managed technical advisors in the construction of the revenue model and the MOIRA analysis of alternative timetables and an external market research agency

The Result: Robust strategy generated, but process terminated by Department for Transport

We developed a robust revenue forecast for the franchise, underpinned with an innovative commercial and customer service strategy.  Unfortunately, the process was terminated by the Department for Transport just prior to the submission of the bid.

 

Contact

Matt Lovering
Matt has over 15 years' experience providing commercial and strategic advice to the transport industry. He has extensive experience advising operators, policy makers and investors across the passenger rail, airport and transport technology markets, developing demand forecasts, commercial strategies and business cases for existing businesses and new schemes.
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