The Go-Ahead Group Plc

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The Go-Ahead Group Plc

Level 16
Cale Cross House
Pilgrim Street
Newcastle upon Tyne NEI 6SU
United Kingdom
(44) 191 232 3123
Fax: (44) 191 221 0315
Web site: http://www.go-ahead.com

Public Company
Incorporated : 1913 as Northern General Transport
Company
Employees : 8,464
Sales : £414.3 million (US$691 million) (1998)
Stock Exchanges : London
NAIC : 485210 Bus Line Operation, Intercity; 485113 Bus Services, Urban & Suburban; 485112 Suburban Commuter Rail Systems; 485111 Suburban Transit Systems, Mixed Mode

From tiny regional bus company to a growing presence on the European urban transport scene, The Go-Ahead Group Plc is riding smoothly into the next century. Go-Ahead, based in northeastern England, has built a strong collection of bus and train transport services subsidiaries and has focused especially on London, one of the world’s most active urban transport markets. The European market has been targeted for the company’s future expansion, however. In 1998 Go-Ahead formed a strategic partnership with France’s Via-Générale de Transport et d’Industrie SA (Via-GTI, a subsidiary of Compagnie Générale des Eaux), making a successful bid to take over operations of London’s Thameslink train service. Go-Ahead also has joined in a consortium with other Europe-based transport providers. This consortium was awarded the contract for the operation of the Stockholm Commuter Railway in Sweden in early 1999. Go-Ahead holds a 39 percent share in this consortium. Go-Ahead’s expansion ambitions have taken it beyond the urban transport market and into the broader transport market with the 1998 acquisition of London-based aviation services company GHI.

The centerpiece of Go-Ahead’s urban transport services division is its two London bus subsidiaries, London Central and London General. The two bus lines operate more than 1,100 vehicles—the largest fleet of the famed red London buses, including the largest number of the world-renowned Routemaster double-decker buses. The two London subsidiaries, which employ more than 3,500 people and operate from ten garages, provide transportation to the Central and South London districts for more than 220 million passengers per year. Go-Ahead’s London-based bus divisions, which operate under five-year contracts with that city’s central transport authority, provide some 18 percent of the city’s total passenger bus needs. As the Routemaster buses—some of which have been in continuous operation for more than 40 years, with more than one million road miles—are scheduled to be phased out by the year 2001, Go-Ahead has invested in modernization of its London fleet, including the purchase of some 200 new vehicles for 1999.

Go-Ahead’s other bus operations include its predecessor company’s former Northern bus line in the company’s Tyne & Wear base; the Oxford Bus Company, serving that city; the Wycombe Bus Company; and the Brighton & Hove Bus and Coach Company. Go-Ahead’s bus subsidiaries operate a combined fleet of more than 2,400 buses, with more than 8,700 employees serving nearly 400 million passengers per year.

Deregulated Transport in the 1980s

The introduction of motor-driven vehicles, including steam-powered, electric-powered, and internal combustion engines, and the creation of a network of paved roads gave rise to new forms of urban transportation. Tramways, at first steam-powered and later electric-powered, were developed by the 1880s, and the first vehicles serving as the forerunners to the modern bus concept appeared shortly after. Urban transport began as a private business concern. An early urban transport company was the Gateshead and District Tramways Company, which began operations in that northeastern area of England in 1883. Gateshead and District Tramways Company was taken over by the British Electric Traction Company in 1897. The company soon added electric-powered trams to its operations.

Developments in the internal combustion engine, and particularly of the diesel engine type, opened the way to new and larger types of vehicles. The motor bus, more flexible than the rail-limited tram, soon made its appearance on England’s city streets and highways. The British Electric Traction Company added its own bus operations, through subsidiary Northern General Transport Company. This predecessor to the later Go-Ahead Group started operation in 1913.

The Northern General Transport Company quickly established itself as a leading public transport concern in the northeastern region. The company’s expansion gave it the economies of scale to enable it to adopt an aggressive ticket pricing program. Northern General’s competitors, unable to meet the company’s prices due to their smaller fleets and lower passenger numbers, abandoned their routes to Northern General. At the dawn of World War II, Northern General had successfully established itself as the sole bus company in the Gateshead district.

Northern General’s position would be further enhanced following the war. The British government chose to encourage development of the nation’s bus routes, adopting laws that called for the substitution of buses for the country’s remaining tram lines. By the 1950s all of the country’s tram lines had been shut down. In that area, a new type of bus was introduced, one which would become famous the world over.

The Routemaster, as the red double-decker bus was called, was developed by Bill Shirley, who was named general manager of London’s Park Royal company in 1953. The Routemaster featured a so-called “monocoque” design, in which the body and chassis were of one piece, making the bus both safer and more reliable. The first Routemaster entered service in 1956. In all, more than 3,000 of the double-decker buses were built before the end of production in 1970. Despite being more expensive to build than the standard type bus, the Routemaster sold well in London, so well that the distinctive red double-decker bus quickly became a symbol of London itself. Designed to last only 15 years, many Routemasters continued to provide service into the 1990s. By then, however, the aging of the fleet and the prohibitive cost of building new models caused the city to call for a phasing out of the Routemaster soon after the year 2,000.

The Routemaster would achieve success in part because of a major shift in urban transportation. In the 1950s the British government began taking control of the country’s public transportation system. The United Kingdom’s bus and train companies were nationalized. Bus transport was grouped under the government-run National Bus Company. The formerly independent bus companies were regrouped as some 70 regional subsidiaries.

In the 1970s, as the Arab Oil Embargo and resulting world economic crisis deepened, the British government began seeking ways to increase public transportation ridership and reduce the country’s dependence on automobiles. Increasing the integration of the country’s bus and train systems offered the prospect of attracting greater numbers of passengers. The Gateshead bus subsidiary would be among the pioneers of such an integrated approach, linking the areas bus routes with its Metro train and subway system, not only by introducing travel cards and transfer tickets good for both bus and train travel, but also by coordinating the two systems’ schedules so that each could feed passengers to the other.

The move would help the Gateshead unit to maintain a healthy balance sheet into the 1980s. During that era the conservative government under Margaret Thatcher sought to privatize the many nationalized British industries. One of the first to be targeted was the country’s public transport system. Express bus coaches, serving the interregional and rural markets, were privatized in 1980. The next step in deregulation was the opening of the country’s urban bus routes to private ownership. This step was accomplished in 1985, for all British cities except London. The National Bus Company would be broken up entirely by the early 1990s, with its regional subsidiaries transformed into private companies, including several serving the London area.

The Gateshead district’s Northern General Transport Company was taken over in a management buyout led by general manager Martin Ballinger in 1987. Northern General then changed its name to Go-Ahead Northern. The company continued to focus on its northeastern district, while developing greater ambitions.

Major Transport Player in the 1990s

Ballinger and the other buyout partners looked forward to bringing Go-Ahead Northern public to ease their debt load and see a return on their investment. To achieve a public listing, however, the company saw the need to expand and, especially, to gain a presence in England’s crucial southern region. In 1993 Go-Ahead saw its opportunity, buying up the Brighton and Hove Bus and Coach Company, serving those southern communities. This purchase was followed by the acquisition of the Oxford Bus Company, including its Wycombe Bus Company subsidiary. Go-Ahead’s focus, however, remained inevitably fixed on the London market, one of the world’s busiest urban transportation markets.

Company Perspectives

Go-Ahead’s corporate goal is to become: One of Europe’s leading urban passenger transport providers. This will be measured in terms of: meeting customer needs; recognition of high quality standards; sensitivity to environmental issues; efficiency of operation and the generation of profits to support reinvestment. Go-Ahead will be a symbol of value, service, and quality against which all others in urban transport are judged, whilst caring for its customers and staff and being known as a quality partner for local authorities, communities and other operators.

Go-Ahead would continue to hover around London itself until 1994, when it acquired the London Central bus company and its important routes. In that year Go-Ahead went public on the London Stock Exchange, taking on the new name of The Go-Ahead Group. The London Central purchase was followed by the acquisition of London General, for £46 million, in 1996. London General, one of the capital city’s most important bus companies, gave Go-Ahead a commanding 18 percent share of the London metropolitan market. The company’s routes served primarily the city’s southern areas, which were poorly served by the London Underground. The London General acquisition also would give Go-Ahead one of the largest fleets of Routemasters.

Seeking to increase the integration of its services, as well as to enter new areas for expansion, Go-Ahead next turned its attention to the city’s passenger railroads as these were being deregulated. In 1996 the company was awarded the contract for the operation of the Thames Trains regional franchise, serving the line between London and outlying areas. The franchise was to be held by Victory Railway Holdings, a joint venture established between Go-Ahead and Thames Trains management. The Thames Trains venture would get off to a rocky start, as technical problems and poor coordination with the railroad authority brought on a high percentage of train delays.

These difficulties did not deter Go-Ahead from going ahead with its railroad expansion plans. In 1997 the company was awarded the franchise for the Thameslink train system, operating between Bedford and Brighton and London, in partnership with the French company Via-GTI. The Go Via partnership also suggested The Go-Ahead Group’s interest in international expansion.

This would follow quickly. In 1998 Go-Ahead announced that it had won the franchise for the operation of the Stockholm commuter rail network, in consortium with Via-GTI and the Sweden-based BK Tag. By now, Go-Ahead’s ambitions extended to a new area of transportation services, that of airline services. In 1998 the company acquired London-based GHI and its Gatwick Handling and other subsidiaries, providing ground-handling, baggage, transport, and other airline support services to Gatwick and other airports. Under Go-Ahead, GHI secured a number of new contracts; several produced losses, however, and in February 1999 Go-Ahead announced that it was restructuring its GHI subsidiary and reducing its payroll.

Nonetheless, Go-Ahead as a whole continued to produce steady increases in revenue growth, as well as strong profits. The company began to take a leading role in antipollution and other environmental efforts, as well as efforts to reduce inner city congestion through guided bus routes, to counter criticism of buses in general while winning new ridership. As the United Kingdom’s bus and rail market became settled in large part by the late 1990s, Go-Ahead’s moves toward international expansion were seen as a strong play for making the company a major transportation provider for the 21st century.

Principal Subsidiaries

Brighton & Hove; London Central; London General; Oxford Bus Company; Wycombe Bus Company; Thames Trains; Thameslink; Go Northeast; Go Coastline; Go Gateshead; Go Northern; Go Wear Buses.