Rail Professional interview: Alistair Gordon
April 2012
Paul Clifton
Keolis is bidding for franchises on its own, after 15 years as a shareholder in other ventures. Its chief executive, Alistair Gordon, tells Paul Clifton why
Nearly one in three rail journeys in Britain is made on a train in which Keolis has a stake. The French company has been involved in railways here since privatisation as a minority shareholder in Govia, which runs Southern, Southeastern and London Midland. More recently Keolis has partnered FirstGroup to run TransPennine Express, and it is part of the consortium that runs trams in Nottingham.
Now it is striking out alone, as one of four bidders for West Coast. And it intends to bid for others.
Why? Has something gone sour in its hitherto successful partnerships with others?
‘We have always had an ambition to run franchises on our own,’ says Keolis CEO Alistair Gordon. ‘We think we have a lot to offer.’
But what can the company do for future franchises that it cannot already do as part of a very successful partnership? Surely going alone diminishes the range of skills with which it can take on the competition?
‘We can offer the same,’ he says.
The dominant shareholder in Keolis is French state railway SNCF, which runs TGV and has a stake in Eurostar, equipping the company with skills in revenue management, pricing and marketing – hence why Keolis feels it’s in a position to bid alone for intercity franchises.
Although it is the biggest public transport operator in France, to the British traveller Keolis is a name largely unheard of. So Gordon has poached PR guru Marsid Greenidge from Southern, and hired David Franks, one of the industry’s most experienced train company managers. Franks, formerly head of National Express’s rail division, is MD-designate of any franchise they win.
Keolis is competing against Virgin, Abellio and FirstGroup for the West Coast franchise. The bids are due in May, with the winner announced in August.
Keolis is a vast organisation with some 47,000 employees and an annual turnover of €4bn.
But how big is the team in the UK? ‘Pure Keolis? Well… I suppose… probably 20 of us. You will find all owning groups have a very small HQ staff. When you bid for a franchise you get all the staff – they transfer from the existing workforce. We have the ability to come in and take over a franchise.’
Gordon has been with Keolis since 2004, leading the bidding for Southern and Southeastern. He has worked away from the limelight and one senses that is his preference. He’s a strategic thinker and planner rather than someone who likes to get his hands dirty with the nitty gritty of running the day-to-day railway. Gordon sits on the boards of all the franchises in which Keolis has a stake – Southern, Southeastern, London Midland, TransPennine Express and the NET trams in Nottingham.
He won’t be drawn on which franchises Keolis will tackle solo and which will continue to be done in partnership with Go Ahead. But it seems logical that Gordon will follow West Coast with an attempt for East Coast, and that the joint venture will fight for the big prize of Thameslink, perhaps along with Essex Thameside. Govia won Thameslink at privatisation and later lost out to FirstGroup. This time around, the new super-franchise will incorporate the whole of Southern and bits of Southeastern, and it will comfortably overtake South West Trains as the country’s largest passenger rail business.
There will be no further bids in partnership with FirstGroup, against which Keolis will compete head-on.
Gordon sees Great Western as a more challenging bid than West Coast, which has already seen £10bn of investment. Keolis had been planning to bid for it, either solo or as a joint venture. But when the deadline to join the beauty contest passed in February, the company’s name was not on the list.
‘Great Western has the unknown impact of Crossrail – not yet fully defined. How far will electrification go? Still not fully defined. There will be all new rolling stock and more than 200 stations to run. It is a different kettle of fish. It is a 14 or 15-year franchise? So that’s seven years of managing it through disruption and seven years of managing a super duper new railway. For something like Great Western, you are given assumptions on what Crossrail will do, assumptions on the trains you will have, and you bid to that. If it changes you need to show your model is flexible enough to be able to modify the costs.’
Gordon makes it clear that he is not at liberty to discuss details of his West Coast bid. The rules of the game prevent it. But he is happy to make generic comments about Keolis’ existing franchises and the way future franchises could be modelled.
Like most rail executives, Alistair Gordon is wary of questions about labour costs. The McNulty report made it clear that the increasing amount of money paid to a growing workforce was an issue to be tackled. The railway employs more than 10,000 more people than it did at privatisation, while the size of the rolling stock fleet has changed little. A driver working overtime and rest days can take home £50,000 a year – more than a Flybe captain, a senior air traffic controller or a primary school head teacher, all of whom require higher qualifications.
Gordon is aware of the union sensitivities on the subject and is careful not to cause offence.
‘The last thing Philip Hammond said before leaving the Department for Transport was that the government realised this was an area that they needed to give train operators support in managing. We cannot address this on our own. Hammond said the staff needed to know that if the franchise fails, they don’t all just transfer from one to another with complete security. In the private sector, if a company fails, people are in trouble and jobs go. We don’t have that incentive, that responsibility, in this industry. If a franchise fails they are all safe. We need to find a way to incentivise staff to play their part in delivering a successful railway. We have a culture at the moment where that is not the case.’
A link to fluctuations in GDP appears likely to replace the current ‘cap and collar’ system. Gordon believes that this will not unduly affect operators – he agrees with the government’s basic proposition that the proposed changes would keep operators focused on delivering cost savings and growing revenue ‘even if the wider economy goes down’.
And if Keolis could only have one franchise, which would it be? Gordon is reluctant to commit, but eventually confesses: ‘Southern and Thameslink combined with Great Northern and the London Bridge bits of Southeastern is the jewel in the crown – it will be 15 per cent of the UK passenger revenue.
‘But it’s a short franchise and it has a lot of change to go through. The key element is change management, and the team that wins it will be the one that shows it can manage the passengers and the stakeholders through the process. It has to be our number one priority because of its scale, and because Southern is where our track record lies. We won’t let other things get in the way of that.’
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