SOUTHWEST Floor 6 Friars Bridge Court 41-45 Blackfriars Road London SE1 BNZ Telephone: 020 7620 5I80 Emat -- 2 February 2016 Dear Mr Pugh Island Line I have been asked to respond to the queries you have raised in your email regarding the Island Line cost/revenue base. I am the Finance Director for Stagecoach South Western Trains and I am responsible for populating the data room to assist bidders in their franchise laid submissions; ant therefore best placed to respond to the issues that you have raised. 1. I can confirm that the revenue numbers quoted reflect the income that relates to Island Line services. The amounts quoted purely reflect income that relates to passenger iourneys on the line between Ryde Pier Head and Shanklin. You may be aware that there is a national income allocation system that allocates income across TOCs and therefore the income values quoted include passenger income relating to iourneys made on the Island Line services where the tickets are sold: a. on the Isle of Wight at Ryde or Sandawn b, elsewhere at national rail stations c. by 3" parties (including travel agents, Wightlink etc.) 2. The values exclude income for tickets sold on the Island that relate to iourneys an other entities (other TOCs, Steam Railway, Wightlink, etc.) The amounts shown also exclude commissions 3. The staff costs for the Island Line were for 2014/l5 (forecast at for 20l5/l6] and include pension contributions and NI payments payable by the Company. A. The staff costs only relate to staff who are based 100?. of their time an Island Line activities. there is no provision whatsoever for management overheads (including Finance, HR, Marketing) these are all borne directly by SSWT. For your information, we are forecasting total expenditure for directly attributable Island Line costs of for This includes the cast of staff, materials to maintain the units, track maintenance costs, insurance, utilities (including electricity to operate the trainsl and the Infrastructure Lease Contract with Network Rail. .u igneiee in inertia and Wei" nu stews resend alltce rneu arises (sin AI AS Blaztti me tax I'vesa Bluctlitais 2 imnei Her/m1, A an at sewer>> cw pi. The mosrsignificum coslesculurion relates to the Infrastrucmre Lease arrangement, where lhe contract expires in March 2019 and Network Roi} recover costs Ohrough a lease charge, which recovers the :09 incurred by the end of Ihe lease. The mosr recent convacr renewa' point was 1" April 2015, when the \ecse charge increased by pn from p.170 a The lease charge will increase further 'm subsequent years as Nerwork Rail will have a shorter fEme period to recover expenditure incurred. I trust that this information is of use Io you, Yours smcerely A West For Stagecoach South Weslern Trains Limited