Sea Containers, the owner of the inter-city rail operator GNER, confirmed yesterday that it has filed for Chapter 11 bankruptcy protection, raising fears over the future of its east coast mainline service and the group's under-funded pension scheme.
The company admitted for the first time that its two main pension schemes, which have a combined deficit of £133m, may have to be wound up and put into the Pension Protection Fund.
There are about 1,300 members in the two schemes. Active members are no longer earning accruals while retired members were told that there would be no change to the benefits they are receiving "at this stage".
GNER is not among the subsidiaries that have been put into Chapter 11 and its employees belong to a separate railways pension scheme. Sea Containers sought to reassure the GNER workforce that it was "business as usual" and that train services would operate normally.
However, Bob Mackenzie, the chief executive of Sea Containers, admitted that the head count would need to come down as GNER sought to combat rising costs and lower-than-expected revenues. Amid fears that 300 jobs could be axed, the Transport and Salaried Staffs Association, which represents ticket office staff, warned of industrial action.
Gerry Doherty, the general secretary of the white collar rail union TSSA, said the cuts had nothing to do with the Sea Containers financial situation and more to do with GNER's "unrealistic bid" to retain the franchise.
Bob Crow, the general secretary of the RMT transport union, urged the Government to block any sacrifice of GNER jobs and warned that redundancies would be resisted. "Our first priority remains to ensure that our members' jobs and the services they provide are not sacrificed simply to enable a privateer based in Bermuda to dig itself out its financial crisis," he said.
Sea Containers filed for protection from its creditors in the US bankruptcy courts on Sunday after failing to repay a $115m (£61m) bond. The company has debts of $650m and $67m of free cash. The bulk of the debt is held by bondholders who are owed $384m.
Mr Mackenzie admitted that the under-performance of GNER had exacerbated the group's financial position. Sea Containers bid £1.3bn in 2005 to retain the east coast mainline franchise, since when revenues have undershot and costs have massively exceeded forecasts. "We cannot get away from the fact that we overbid for it but it is certainly not our intention at this point in time to give up the franchise," Mr Mackenzie said.
He declined to blame his predecessors, the Sea Containers founder James Sherwood and Christopher Garnett, the former chief executive of GNER, but criticised the present franchise system for encouraging train operators to bid too high. "The pendulum has probably swung too far in the wrong direction when you are looking at returns of just 2.75 per cent on what is a pretty risky business," he said.Reuse content