Firms Vie for Slice of British Rail

JOHN MAJOR'S government has decided to buck European trends by privatizing large chunks of the loss-making state train network, British Rail.

BR sources say Mr. Major's plans, announced July 14, for shunting key components of BR into the private sector and asking them to operate there profitably assume that in future only 0.12 percent of gross national product (GNP) will be spent on Britain's train network.

In France, Spain, and the Netherlands an average 0.7 percent of GNP is spent on state-owned railways. Only in Germany is there an official intention to privatize the entire national rail system.

Under the provisions of a government white paper, "New Opportunities for the Railways," and now under close study by transport specialists, most British train passenger services will be run by private sector companies.

There will be a central franchising authority, Railtrack, to coordinate the system. Otherwise, market economics will be the touchstone to the system's success or failure.

Major has given his personal backing to the plan to sell off BR. In the April general election campaign he defended privatizing BR as a "natural follow-up" to Margaret Thatcher's successful privatization of many state-owned enterprises.

Unveiling the plan, Transport Secretary John MacGregor noted that BR was soaking up more than British pounds1 billion ($1.92 billion) in state subsidies annually.

Mr. MacGregor said BR has been "more insulated from the demands of the market than its private sector airline, coach, and road haulage competitors. It therefore has fewer incentives to improve its performance and less freedom to respond to what the customer wants. Radical changes are needed." The changes the government proposes are sparking lively interest in the transport industry. Five private companies are reported to be seriously interested in operating sections of BR's network.

Richard Branson, chairman of Virgin Atlantic Airways, said last month that he planned to lease four trains a day from BR and run airline-style services, including free meals, between London and Edinburgh, starting next summer.

"We intend to expand the market, and we will be bringing a quality of service to rail that's unheard of in Britain," Mr. Branson said July 21. He intends to hire high-speed trains from BR, refurbish the coaches, and pay a track fee to Railtrack. Virgin sources last weekend said Branson's rail experts were preparing a pilot scheme to put to the government.

SEA Containers, owners of the luxury Orient Express, which carries passengers between London and Venice, and the British Airports Authority, have expressed an interest in leasing railtrack.

A much bolder development was foreshadowed July 29 by senior managers of InterCity, the BR network that links Britain's major metropolitan areas. They were reported to be proposing a management buyout, backed by private capital, that would keep InterCity's 1,869 miles of track under a single management, displacing the present BR board.

An InterCity manager involved in the bid said: "A buyout of the entire network would preserve the existing integrated system and make it possible to place administration on a new footing. It would be a tragedy to see the network sold off in bits, producing different standards in different parts of the country.

Britain's privatization plan contrasts sharply with the approach to rail transport of other European countries. Last week Paul Quiles, France's transport minister, defended his country's state-owned rail system: "Good management is not at odds with the concept of a public company."

In the Netherlands over the past five years official policy has been to switch spending from road building to railway expansion. In that period the number of passengers on Dutch state railways has increased by 25 percent, government figures show.

Only in Germany is there a desire to follow Britain. The Bonn government said July 15 that it intended to split up the country's state rail system into three private companies by the year 2002.