Nottingham's tram network operator says passenger numbers will never get back to what they were before the coronavirus pandemic as it adjusts to more people working from home. Tramlink, which operates the city's trams under the NET brand, made a loss of around £20 million last year as its chief executive spoke of the 'worst performance ever seen' during last summer's heatwave.
Investors in the project are not expected to "get rich" from it, but Tramlink says it is confident of performing well, delivering a good value service and giving shareholders a "moderate return". Tramlink is a Private Finance Initiative (PFI) concession, where private firms manage public projects, with the investment paid back over a set period of time.
It won the 22-year contract from Nottingham City Council in December 2011 to build new extensions to the city's tram network and operate the service under the NET brand. Releasing its accounts for the year ending March 2022, NET says passenger journeys recovered to 9.1 million, compared to 3.4 million in previous years.
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Through 2022, this recovery continued to reach 13.5 million passenger journeys and traffic volumes are now around 80 percent of what they were before the pandemic. But Tim Hesketh, the CEO of Tramlink, said: "Fare revenue never really reached the targets we aspired to but was nonetheless enough for the project to keep going and tick along quite nicely.
"Then Covid hit us and our fare revenue dropped to 5% of what it was pre-covid. We have been in recovery mode for a couple of years and what we're seeing now is a significant shift in people's commuting and working behaviour.
"What we're seeing is that people in white-collar jobs are tending to commute less and work from home more. We used to compete with our bus colleagues for commuters, now we're competing with the kitchen table.
"Even today, we're only at 80% of our pre-covid passenger numbers. We think we've reached the end of the recovery and we're now into the new normal. We don't expect another year of continued recovery growth back to 100%, we think we'll be back to our normal growth patterns from here on in."
Overall, losses for the year ending March 2022 total £20.4 million, compared to £21.9 million the year before. The announcement comes after NET recently confirmed that fare prices will increase from April 3, with an adult single ticket to cost passengers £3.
Although lower than what they were, Mr Hesketh says passenger journeys still broadly follow the seasonal patterns they have done since 2011. This includes a sharp drop when Nottingham students go back home in the summer, followed by a rise upon their return and the coinciding Goose Fair.
There is still a build up to Christmas and the Winter Wonderland, followed by another drop in January. But although those patterns remain, the passenger numbers involved remain lower than what they were and Tramlink will therefore be restructuring its debts.
Mr Hesketh says he expects this process to close in the coming months, but promised that passengers will not see any differences in services and timetables. The only difference passengers may see is a tougher crackdown on those who avoid fares, which Tim Hesketh says is costing Tramlink around £1 million a year currently.
As well as getting tougher on fare dodging, Tim Hesketh says the performance of the tram network needs to improve in some areas. In particular, he says contingency plans are being drawn up in the event of extreme weather, such as the record temperatures that were seen during last summer's heatwave.
Nottingham's trams are designed to withstand 35 degrees, but the rail temperature ended up reaching 62 degrees at one stage. Mr Hesketh also says Tramlink may have made the wrong call on trying to keep trams going at some points, giving that the air conditioning on 15 of them ended up being broken.
Tim Hesketh said: "The back end of 2022 was the worst performance we have seen. We've gone a long way to getting it right, but there's still areas for improvement and we're working hard with our operator to make sure we are delivering a reliable and consistent service.
"We've got to acknowledge and recognise the fact that we've got it wrong, particularly during the last part of the summer where performance just wasn't acceptable. Too many cancelled trams, too much disruption."
The wider economic climate also continues to affect Nottingham's tram system, with Mr Hesketh saying Tramlink could have ended up spending 90% of its fare revenue just on electricity without Government support. Given all of the above challenges, Mr Hesketh said investors may not make the returns they originally anticipated.
He added: "We're still optimistic that if we can perform well and deliver a good value service, then there's every reason to expect our shareholders will get a moderate return out of it. But nobody is getting rich on us anytime soon, they will at least get their money back."
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