11.09.12
Virgin tells MPs its WCML fight ‘not about profit’
Sir Richard Branson, giving evidence to the Commons transport select committee yesterday, argued that his campaign to overturn the Government’s decision on the West Coast franchise is not all about profit and that rival FirstGroup’s winning bid is “preposterous”.
The founder of Virgin Rail, the incumbent West Coast operator, has labelled the franchising system “flawed” and is calling for a review of the bidding process. The judge has yet to decide whether to grant a judicial review into the decision to award the contract to FirstGroup.
Sir Richard said the DfT decision to go with First was “bad for the country, bad for passengers on the West Coast mainline and bad for passengers on other lines”.
He added: “A successful West Coast franchise is vital for the country. A bad decision will impact the UK...Because the Department for Transport did not follow their own rules, the most risky bid was accepted.”
Virgin’s bid for the franchise was based on achieving an average of 7% operating margin over the course of the contract, compared to 5% from FirstGroup. But Sir Richard denied allegations that profits were his priority. He said: “The profit motive is actually not that important to me. I am lucky enough to afford breakfast, lunch and dinner every day for the rest of my life.
“The First Group bid is absolutely preposterous when you examine it. It is taking the system for a ride literally.”
Virgin has raised concerns that FirstGroup’s bid promises payments to Government which are too high, based on unachievable passenger growth, which could lead to the company defaulting on the contract.
But chief executive of FirstGroup, Tim O’Toole, said: “I don’t see any chance of us handing the keys back. We have been in the rail business for a long time. I like to think we are very good at it.”
He added that “no business who cares about their reputation – where this is a core part of it – would so cynically manipulate the process such that they would throw away their prospects of continuing to be in the business longer term”.
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