Increase in fares helps to push up revenues at Northern Rail

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FARE hikes helped passenger revenues increase almost 10 per cent year-on-year at Northern Rail, but lower subsidies dented profits.

The Anglo-Dutch owned company, the UK’s biggest train operator, earned pre-tax profits of £38.5m, down four per cent on £40.2m a year earlier, according to figures posted with Companies House covering the year to the start of January.

The heavily-subsidised firm operates across a vast local rail network spanning Yorkshire, Lincolnshire, the North East and North West. It serves cities including Leeds, Hull and Sheffield, and runs lines to towns including Ilkley, Scarborough, and Whitby.

Northern is owned equally by British outsourcing firm Serco and Abellio, a subsidiary of Dutch rail operator Nederlandse Spoorwegen.

But despite lower profits, Northern paid out £27.6m in dividends to its owners, up almost a quarter from £22.3m a year earlier.

Passenger revenues of £199m were up almost £17m or 9.3 per cent on the prior year. It paid £15.1m of this to the Department for Transport (DfT).

The firm did not break down how much of its passenger revenue increase came from higher fares. It hiked fares by an average of 6.7 per cent in January this year.

“The increase in passenger revenue is driven both by the fare increases in January (which are largely regulated by the DfT), increased demand, and also specific initiatives that Northern has invested in, such as improving opportunities for passengers to buy tickets and reducing ticketless travel,” said managing director Ian Bevan in a statement.

According to the Department for Transport, Northern was the UK’s most heavily-subsidised rail line in 2010/11, at a total 34p per passenger per mile. The next most subsidised line was the TransPennine route, which received 20.9p per passenger per mile.

Northern’s subsidies from Government fell £34.2m to £315m, down from £352m a year earlier.

Lower subsidies drove group turnover down two per cent to £570.6m.

Northern said it was “satisfied” with its performance during the year and hailed the higher takings from passengers. “Northern is continuing to achieve good levels of revenue growth, particularly around the urban hubs,” it said.

Its capital investment totalled £3.1m during the year, including CCTV and ticket machine installation. Mr Bevan said the firm has invested more than £30m since taking over in 2004, ahead of its requirement to spend just £250,000 annually on better access.

“We have since continued to work closely with the DfT to improve services, securing an extra 50 carriages in 2011, which are helping to reduce crowding around Yorkshire, and in particular Leeds and Sheffield,” he said.

“We’re employing 7.5 per cent more people than we were at the start of the franchise and independent research estimates that each year our services generate at least £650m of economic and other benefits for the North of England, providing a 2:1 return on subsidy.”

But Peter Johnson, secretary of Wharfedale Rail Users’ Group, said: “Set against the fact that the dividend is going up and fares are going up, this is another example of a poor deal for rail users.

“We’re expecting our fares to be going up by anything up to 10 per cent on this line.”

Mr Johnson, who lives in Ilkley, added Northern is “in many respects, in terms of delivering a service, pretty good”.

“But at the heart of this, our users are facing constant fare increases,” he said.

Northern recently won an extension to the franchise until April 2014 and plans to start a full re-bid next year.

However, the current franchise structure is in doubt, with organisations from across the North calling for devolution of local rail.

Bodies including the South Yorkshire Integrated Transport Authority (SYITA), Metro in West Yorkshire and Greater Manchester want greater powers to be passed down from the Government for the running of the local rail network, with the creation of a new organisation, the Rail in the North Executive (RiNE).

The authorities are also calling for a new pan-North of England rail franchise which would merge the Northern and TransPennine Express franchises.

Mick Jameson, chairman of SYITA, said recently: “Compared to places down south, the North of England tends to get a raw deal when it comes to invest- ment.

“These proposals would mean we would have more powers to invest in our local railways.”

Northern’s operations cover about 500 stations across the North, an area with 14.2m inhabitants.

The operator hailed its improved public performance measure (PPM), which was 83.79 per cent in 2004.

Northern said in the seven months to the start of January, this key measure of train punctuality was up to 91.63 per cent.

It was named rail public transport operator of the year at the National Transport Awards in October 2011.

john.collingridge@ypn.co.uk