The Labour Party is preparing to launch a direct rival to Trainline as part of its nationalisation plans in a move that could ‘decimate’ the rail ticket-selling giant’s business.
The Mail on Sunday can reveal that if Labour gets into power it would create a ‘one-stop shop’ for rail passengers to buy tickets online without booking fees.
It would create major competition for third-party ticket sellers such as Trainline, which floated on the London Stock Exchange in the summer and has grown into one of Britain’s largest technology companies with a £2.2 billion valuation.
Fare lady: Trainline chief Clare Gilmartin is sitting on shares worth £40 million
Labour’s scheme will not only be a major blow to Trainline, but would also hit thousands of small shareholders and pension funds that have just bought into the company.
It also threatens the windfall handed to Trainline bosses including chief executive Clare Gilmartin, who cashed in £16 million at the float in June but still owns shares worth £40 million.
But several hedge funds stand to gain after starting to bet against Trainline’s shares in recent days.
Savers have already been warned that their nest eggs are under threat from Labour’s plans to offer free broadband, which would involve nationalising part of BT, as well as taking power and energy firms into public ownership.
Labour had detailed its plans to renationalise the railways but had not outlined plans to introduce a central ticket-selling service.
Trainline – a licensed partner of National Rail which is run by the private train operators that would be nationalised under Labour –labels itself the ‘one-stop shop for train and coach travel’. It makes money by charging booking fees of up to £1.50 per transaction.
By contrast, National Rail’s Enquiries division does not sell tickets. Instead it directs customers to the train operators which typically do not charge booking fees.
The branding for Labour’s new service has yet to be decided. Andy McDonald, Shadow Transport Secretary, said: ‘Labour’s publicly owned rail company will provide a simple one-stop shop for ticket information and purchase, replacing the confusing ticket sales of private train operators. The independent ticketing websites and apps that currently provide a valuable service will continue as at present.’
Trainline had warned in its June float prospectus about the ‘material adverse impact’ of possible industry changes, including Labour’s nationalisation plans.
In the document, Trainline also warned of the damage that could be caused if National Rail Enquiries, whose role would be taken over by Labour’s new company, started selling its own tickets.
Trainline said National Rail Enquiries may be able to ‘capture a material share of the market more quickly than other online and mobile rail ticket providers, due in part to the strength of the National Rail brand, which could impact the group’s sales volumes and revenue’.
Labour’s plans would not affect Trainline’s operations in selling train tickets abroad. But the UK makes up a large chunk of the company’s business, with net ticket sales worth £1.65 billion last year.
Trainline charges commission, booking and other service fees – totalling 8 per cent of the £1.65 billion – and so its UK division took home a healthy £136.7 million in revenues last year. This was 65 per cent of the entire group’s turnover.
Only a few weeks ago, the former private equity owners of Trainline, led by KKR, offloaded their remaining shares for around £279 million. KKR declined to comment on the reasons for selling up so soon after the float which was the second largest in the UK this year. KKR sold £685 million of shares in the float.
Notably, hedge funds Ennismore and Polar Capital quietly began betting against Trainline shares last month and have now built up short positions worth £29 million. They would be quids in if Labour’s plans spook investors.
The Mail on Sunday has also learned that Viceroy Research, a firm set up by former social worker Fraser Perring, has built up a short position – below the threshold that requires disclosure. In a report on Trainline, sent to Viceroy clients, the hedge fund warns that if National Rail Enquiries launched its own service it would ‘decimate Trainline.com’s market share’.
It added: ‘We feel the market is not sufficiently discounting the competition risks faced by incumbents. National Rail Enquiries has sufficient resources and capabilities to gain transaction and market share in a short period of time.’
Trainline was founded in 1997 by Virgin Group and was bought by KKR in 2015 for £450 million. They floated it this year for a valuation of nearly £1.7 billion which has since risen to more than £2.2 billion.
Trainline declined to comment. Berlin-based travel booking site Omio, which would also be hit by the plans, said its platform offers ‘more than train ticketing’ and would remain a ‘compelling offer to travellers in the UK and beyond’.
