Failure of private services may hit British Rail sell-off

GOVERNMENT plans to privatise British Rail received a double setback yesterday with the announcement that the first attempt to run private passenger services on its network has failed and that a private freight company which used a combination of road and rail is to go into liquidation.

Stagecoach, the company which was running two coaches attached to a BR train in each direction on the London to Aberdeen line, is to end that service on 1 November because it was only selling about half the available seats. The 58- seater coaches, which were leased by Stagecoach, will revert to BR.

Charterail, which used containers that could be hauled by both road and train, which was a joint venture between BR and the private sector, ceased operations two months ago. It claimed BR charges made its service uneconomical and yesterday announced that it would be going into liquidation in two weeks after failing to renegotiate rates with BR.

Robin Gisby, managing director of Charterail, said: 'The rates BR were offering were based on their total costs and were simply not competitive. They made no attempt to reduce the rates in the light of the recession when their competitors are lowering prices. There is no short-term flexibility.'

The fates of Stagecoach and Charterail demonstrate the difficulties for the private sector in making a profit out of rail services. The entrepreneur Richard Branson has dropped plans to run trains between London and Scotland prior to the franchising out of services which the Government hopes will start in April 1994.

City sources feel that the collapse of Charterail will be a deterrent to companies wanting to invest in a privatisated BR. 'I can only see very limited interest in privatisation, perhaps in running trains on the few existing profitable routes, but the fate of Stagecoach and Charterail is bound to put off potential investors,' one City source said. The privatisation of BR's freight divisions, already put into question by the cutbacks in coal mining, will be jeopardised by Charterail's collapse.

Stagecoach, whose core business is running local bus services, launched its BR scheme in May this year, offering a hostess service on the overnight train in both directions, with free tea and coffee and two free meals. While BR's InterCity provided only sleeping accommodation, at a higher price than the normal fare, Stagecoach offered seats at prices comparable with normal BR journeys.

Stagecoach has now decided on a different venture. It will continue providing seats on London to Aberdeen and London to Glasgow trains at a rate which sharply undercuts BR prices. It will effectively operate as a charter business, with between 20 and 30 seats per night in each direction on the Aberdeen service, and 40 to 60 on the Glasgow service.

Janet Campbell, a spokeswoman for Stagecoach, said last night: 'We did extensive surveys of our customers and we found that they wanted cheap tickets and not all the services like hostesses and free meals that we provided.'

A Stagecoach ticket to Glasgow will be pounds 25 single and pounds 34 return, compared to BR's cheapest Super Apex, only obtainable 14 days in advance, which is pounds 29. BR's normal saver return is pounds 67 and a single is pounds 57.