08.10.12
FirstGroup considers legal action over franchise extension
FirstGroup may take legal action against the Department for Transport if Virgin Trains secures an extension of the West Coast rail franchise past December 9.
The operator had bid £13.3bn to run the London to Scotland services until 2028. However, the Department for Transport decided to abandon the handover to FirstGroup. Shares have plummeted by over a fifth and analysts have stated that £40m could be lost within the company this year.
Virgin Trains is considered likely to continue running the London to Glasgow route beyond December 9 after it emerged the DfT had made a series of errors in awarding the franchise. Alternatively, the Government’s in-house rail unit Directly Operated Railways could take over.
A FirstGroup spokesman said: “Because we have not yet received a briefing from the DfT to tell us exactly what happened, you would therefore expect that we are exploring all rights and options.”
However, Virgin stated: “Virgin's lawyers have made it clear that there is no issue about competition law in this.”
Transport secretary Patrick McLoughlin said the award to FirstGroup was withdrawn after “deeply regrettable and completely unacceptable mistakes made by my department in the way it managed the process.”
The franchising system is currently in a state of paralysis as the Government conducts two investigations. Four franchises are due to expire next year: East Coast, Great Western, Essex Thameside and Thameslink.
The RMT trade union has urged the Government to bring those contracts under the control of DOR as they expire, effectively renationalising the railways route by route.
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