Financial News
- 16 August 2012, 15:34
Branson Bitter As Rail Rival Scoops Contract
Sir Richard Branson has threatened to walk away from the rail industry after Virgin lost its West Coast franchise.
Transport giant FirstGroup beat Virgin Rail in the bidding battle to run the London to Scotland line - a move described by the tycoon as "insanity."
Virgin's founder told Sky News he feared Government had repeated mistakes of the past by awarding a franchise to a company that he claimed could not possibly deliver on the promises it had made, citing the demise of GNER on the East Coast.
"We had a deliverable bid year-on-year based on realistic figures ...we are slightly cynical about this," he said.
It means an end to Virgin's 15 years of operating the line which has seen tilting, high-speed Pendolino trains serve cities like Birmingham, Manchester, Liverpool and Glasgow.
The West Coast carried around 13 million passengers a year in 1997. The annual total is now around 31 million.
FirstGroup, which already operates a number of rail routes including Great Western and ScotRail, is believed to have outbid Virgin's £4.8bn on West Coast, offering as much as £5.5bn to operate the new 14-year franchise which will begin in December.
It is also thought FirstGroup could operate West Coast under the name Horizon Trains Limited, with a firm of this name having been registered at Companies House.
FirstGroup chief executive Tim O'Toole said: "We are delighted to be selected by Government to operate this unique railway which connects communities across the country and plays a vital role in the UK's economic growth.
"We will be making significant improvements including reduced journey times and introducing new direct services."
Mr O'Toole added: "In support of our commitment to generate increased passenger growth, we will be reducing Standard Anytime fares by 15% on average."
But, following the news, FirstGroup's share price dropped by 5.5% in early morning trading.
In a statement released to mark the announcement, Sir Richard expressed his sadness saying the decision "is extremely disappointing for Virgin, and for our staff that have worked so hard to transform this railway over the last 15 years".
He said cuts in quality and fare rises would have been inevitable if Virgin's bid was any higher and he did not want to risk bankruptcy by overbidding.
Sir Richard added: "Sadly, the Government has chosen to take that risk with First Group and we only hope they will continue to drive dramatic improvements on this line for years to come without letting everybody down."
He criticised the Government further saying: "Insanity is doing the same thing over and over again and expecting different results. When will the Department for Transport learn?"
Labour and transport unions have already warned that a change of ownership could mean higher fares, poorer services and job cuts.
RMT general secretary Bob Crow said before the decision was announced: "Whoever wins the West Coast route, and all the signs point to FirstGroup, they should be left in no doubt that we will mount a massive industrial, political and public campaign to stop any attacks on our members' jobs and the services that they provide to the travelling public."
He added the franchise was being left "with a gold-plated, 12-year contract linked to massive cuts to jobs and passenger services and huge increases in fares as the winning bidder battles to extract every penny that they can in profit".
Simon Weller, national officer of the train drivers' union Aslef, said: "The Government is always seduced by the big buck, but any savings on the franchise will have to come by cutting staffing or higher fares."
Shadow transport secretary Maria Eagle said: "Passengers are set to lose out no matter which companies win these new longer franchises because ministers have promised successful bidders they can hike fares, cut services and close ticket offices."
Rail minister Theresa Villiers said: "Labour have admitted that their only transport policy is rail renationalisation with huge costs and massive upheaval for our railways."
She added: "We are currently evaluating bids for the Intercity West Coast franchise. All franchise bids are judged on their affordability, deliverability and their value for money for passengers and the taxpayer."
what do you think?
John Poole
Time to bring the whole of the rail network back under public ownership. Should never have been sold off in the first place. This is too important a national transport network for it to be given over to the private sector.
Lorgar Aurelian
I know Virgin had their problems but First are terrible, i just can't see how a change in ownership even to a decent company would do any good. As a small country i don't even understand why we need so many operators anyway. Bring back British Rail.
Ben Ralph
Privatised rail does. not. work. It is that simple. It is purely a licence to print money for parasitic big business at the expense of travellers who often have no choice other than to use an unreliable, overcrowded service at extortionate cost.
Bernard Petrie
If the present system is so good how come we pay some of the highest train fares in Europe? In some instances it is cheaper to fly than get a train. And as to getting a ticket, you virtually need a degree in data management to understand how, talk about confusing.
Roger Collins
Which company walked out of the East Coast Main line? surely its not the company that has just won the West Coast main line beggars belief
mick vickers
National Express
Nigel L
National Express handed back the East Coast franchise not First Group
andrew bucknall
why werent all these decisions made public before the olympics.didnt want to rock the boat and have everyone happy.now its over back to screwing everyone over.the government that doesnt listen and goes back on promises...not long now before they are confined to hiostory...and yes i was one of the idiots that voted them in on their false promises.
Nigel Spate
So Beardie becomes Barbie and we can look forward to Cramdelinos when First removes the tables and puts in more seats. Glad that Beardie lost it but the only winners will be fFrst Group Shareholders - and the passengers will get higher fares less room and baby Cramdelinos! I despair
A14DEV
This decision beggars belief. I travel extensively on the British rail network and Virgin are head and shoulders; no ankles, kneecaps, waist, head and shoulders above any of the other networks! Is it another case of what Britain does best - build up an individual and when he becomes successful, knock him down. T Talk about banking incompetence, those goons who run our railways must come a close second!
mick vickers
As a regular user of Virgin West Coast I an appalled that this contract has gone to another bus company. Virgin Trains has had the highest satisfaction figures of any train company and prides itself in its customer service. When Virgin lost the Cross Country franchise to Arriva it did not take that long to totally ruin it to the extent that I never use Cross Country at all due to its ridiculous fares policy and total lack of customer service.If you just want to operate a transport service where the customer just has to put up with what is provided then just look at bus companies. First Group will soon turn what is a pleasant journey experience into nightmare. RIP Virgin Trains
Raymond Castle
First Group run terrible bus services so it beggar's belief that they've been given a train set to play with!
Dave Marshall
To err is human, but if you really want to screw things up you need a politician.
Dave Marshall
Definition of politician:- Species of sub-human with no discernible talents or abilities save to profit at the expense of others and lie about it.
AliBumin
If FirstGroup operate their train service as they do their bus service, then I`m afraid its just discomfort and frustration ahead for travellers. And of course their customer service department is `excellent`, my foot.
Scott Cooper
Aside from the obvious reasons of why national strategic public services such as transport, policing, energy, etc.. (do you really want a special interest group to be able to shut off the national grid or threaten to do so simply because the govt brings in legislation they don't like) the bidding process of cheapest winz is a terrible model, they should be based on value for money, that is to say if thet can offer superior service for a realistic price it should win, sure may not get as money for the tax payer but at least as commuters we won't be shafted and can reuse the operation to stay functional (in the long term that may even work out to save tax payer money)
Michael Dynes
The only way to hurt these companies is through organised boycotts. They ONLY want your money. The ONLY way to deal with them is not to give it to them. As my friend below says, sometimes flights can be cheaper, so can taxis be if there are four of you. Negotiate and deal with the alternatives, coach companies, taxi services that have mini buses. If you can give them a regular steady market, they will bend over backwards to meet your needs. Only the customers can respond to this, by simply withdrawing their custom.
Roger W. Patrick
Here in the West Country, FirstBus is known as "WorstBus". Poor services, extortionate fares, and lousy timekeeping. They have nearly got a monopoly on Bus services out of our town. The buses finish at 7.30 pm, into Plymouth, and there is nothing back to Ivybridge after 8pm. So a night in town is impossible. In addition they have rail services from here to London which are the poorest, in terms of time, cost and service. Like thier buses, some trains are so old that they need constant maintenance to keep them going. So, another fantastic decision by "Cameron's Clots". No doubt either "brown envelopes" have been flying around, you know: " We'll make sure you have an executive Directorship, Old Boy", or donations to the Tory party will be in the post!
Roger W. Patrick
I agree with John Poole. time we owned the railways publicly again. At least they ran a "Public Service". France doesn't have all this franchise nonsense, and thier long distance train are fantastic. It's interesting to note, that there isn't a rail servivce in tghe world that runs at a profit without Government help. So why do we keep on with this privaye rail nonsense?
Name witheld
4:37am on 15/8/2012
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