Virgin Loses Franchise to FirstGroup

Virgin Trains has been stripped of the West Coast Main Line franchise, which has been awarded to FirstGroup, the biggest rail operator in the country. Virgin Group founder and chairman Sir Richard Branson isn’t very happy with the government’s decision, and says the rail company will ‘almost definitely’ stop bidding for other franchises.

FirstGroup says it will offer significant improvements in the frequency and quality of services. The company already operates several rail routes, including ScotRail and Great Western. Under the name First West Coast Limited, the group will take over the franchise starting December 9, and its contract will end in 2026.

About 31 million passengers travel on the West Coast Main Line between London, West Midlands, North West, North Wales and Scotland’s central belt. FirstGroup says it will introduce 11 new electric trains on the Birmingham-Glasgow route. These will have six carriages and be able to reach speeds of 125mph. The company will also offer more direct services between the cities. The government says the new trains will add another 12,000 seats a day from 2016. On top of this, the Pendolino tilting trains Virgin Trains is currently introducing will provide over 28,000 seats a day.

FirstGroup chief executive Tim O’Toole says this contract is a good deal for them and the public. Their bid delivers value to taxpayers by returning premiums to the government through sustainable growth in passenger numbers, as well as revenues from using the substantial capacity available. First West Coast says £5.5 billion will be returned at net present value during the contract. This is believed to be much more than what Virgin Trains offered.

Virgin Trains is 49% owned by transport group Stagecoach, which says the reason it failed to secure the new contract was due to FirstGroup being contracted to pay substantially higher premium payments to the government. Under the franchise, First West Coast will have to pay £265 million in penalties if it terminates the contract early or fails to repay the government on time.

Sir Richard Branson says that their loss of the franchise is very disappointing, and their bid was realistic. They didn’t want to risk nearly certain bankruptcy during the contract, which is what happened to National Express and GNER when they overbid for the East Coast Main Line. The government is sadly choosing to take that risk with FristGroup, and they hope the company will continue driving dramatic improvements on the line for years to come.

Branson added that the government’s current bid process has problems and that Virgin Trains is very unlikely to bid for a franchise again. The process is too uncertain and expensive, as their latest bid cost £14 million. They made realistic offers for the East Coast Main Line twice in the past, and the Department for Transport (DfT) rejected them for bids that are totally unrealistic. Therefore, he added, they will have to consider hard about embarking on another offer.

Meanwhile, rail unions have warned FirstGroup that they will strongly resist any attempts by the company to save money through job cuts and changes to working conditions. Rail, Maritime and Transport (RMT) union general secretary Bob Crow says the company shouldn’t doubt if they will carry out a massive public and political campaign to halt any attacks on their members’ jobs and the services they deliver to travellers. This comes amid fears that cost-cutting may lead to as many as 800 jobs being lost.