Byers, Byers, pants on fire

NO WONDER Stephen Byers moved under the cover of darkness to enlist the assistance of Mr Justice Lightman to place Railtrack into administration over the October 7 weekend.

If the Transport Secretary had sought his order in the bright light of the working day, with an updated set of Railtrack's accounts to hand, he would never have got his order.

In fact, although Railtrack has some liability issues, its finances were and are in considerably better shape than many other companies, such as Marconi, which are up to their neck in losses and debt and are only kept afloat by the good graces of the banks.

Byers had it in his head that, because Railtrack was so unpopular, he could act with impunity. This was no more than arrogance. What we know from the company results for the half to September is that Railtrack was in profit, earning £292m over the six months, that it had net assets of £2.9bn (more than £5 a share) and bank lines of £1bn.

These are not phony figures. They have been crawled over by auditors Deloitte & Touche and prepared on exactly the same basis as in previous accounting periods.

While it would need further government money to upgrade post-Hatfield and to press on with modernisation of the railway system, Railtrack was far from insolvent.

It had a track record of improving profits and paying dividends, and had sufficient bank lines to ensure that, when the private sector was asked for further investment, it would come through.

Attempts to spin the Railtrack profits into a bad news story, by suggesting commuters would be angered by profits made by the company responsible for the long delays at the platform, do not add up either. As the interim results statement makes clear, delays caused by Railtrack in the six months were 52% down. Anything that has happened subsequently is down to Byers' hapless efforts.

Now that chief executive Steve Marshall has been relieved of responsibility for the network, he can concentrate on running the remaining assets, including the Channel Tunnel Rail Link, and establishing what share of the property assets belongs to the group.

Intriguingly, Marshall and Railtrack are talking of a relisting on the stock market once some certainty has been established.

There would be plenty of investors more willing to back the legacy management than the new spatchcock company limited by guarantee, invented by a minister who plundered the savings of widows, orphans and trade unionists.

Bonus warning

THE Financial Services Authority's insurance boss, John Tiner, is clearly determined not to take

hostages among his charges. As the industry's actuaries set about the mysterious task of setting end-of-year bonus rates, Tiner is making it clear that there should be no Equitable Life-style imprudence.

He urges that bonus rates should be set with regard to ongoing 'financial soundness' and that the insurers should consider any exposures in the shape of guarantees, before being too generous to policyholders.

It is entirely sensible that, in difficult markets, when policyholders' funds have been eroded, life assurers do not get carried away.

There is a tendency to see the bonus rates purely as a marketing tool to tempt future buyers, and to smooth out market fluctuations rather than as a test of prudence.

Tiner and the FSA want to change that. Companies whose bonuses look out of line may be required by the bully boys at Canary Wharf to explain the 'dark arts' used to fix the payments.

A consequence of the FSA's actions may be a switch away from 'with-profits' schemes - so long the industry staple - to more transparent vehicles such as unitlinked policies.

Companies with the most flexibility, including Prudential, Standard Life and Legal & General, could be the winners.

Blue sky in sight

BRITISH Airways is surprisingly sanguine about the justice department's ruling against its alliance with American Airlines.

The final arbiter in this case will be the US transport department, which understands better the new economics of alliances and favours an open skies deal across the Atlantic.

But, significantly, this time around the justice department suggests that the two carriers would have to shed 126 slots at Heathrow for the deal to be acceptable. This is way below the 325 slots the US demanded last time, and the 267 the EU wanted.

Given that BA is cutting capacity at Heathrow anyway, a compromise over slots, although not BA's first choice, is certainly possible.