Rail franchises operators & contracts

11.04.19

Branson says Virgin Trains could be gone by November after ‘baffling’ DfT franchise decision

Virgin Trains could disappear from Britain’s railways by the end of the year, Sir Richard Branson has announced after the government disqualified its joint franchise bid with Stagecoach.

Branson he was “devastated” by the decision after Virgin, which is 49% owned by Stagecoach, has “led the industry” for over two decades.

The DfT disallowed Virgin’s joint bid with Stagecoach and France’s SNCF to renew the West Coast rail franchise because the bid was “non-compliant” with pension rules.

Stagecoach also bid for the South Eastern franchise and to renew its East Midlands franchise, but both were rejected and the latter has now been awarded to Abellio.

The government said the company had “repeatedly ignored the rules” and was “responsible for its own disqualification, whilst Stagecoach said it was “shocked” and requested an urgent meeting with the DfT.

In a blog for Virgin, Branson said that the disqualification means Virgin Trains could be gone from the UK in November.

He said: “We’re baffled why the DfT did not tell us that we would be disqualified or even discuss the issue – they have known about this qualification in our bid on pensions for months.

“We have significant concerns over the latest developments and their implications for the future of the UK rail market. We are still looking closely at the decision and we are now considering our options.”

Branson highlighted the Virgin Trains’ 90% customer satisfaction rating in the National Rail Passenger Survey and pointed to the delivery of new trains, automatic delay repay, and tripling passenger journeys compared to 1997.

The disqualification stems from a row over pension rules, with the Pensions Regulator estimating the UK rail industry will need an additional £5-6bn to plug a pensions shortfall.

Stagecoach claims the government has taken a “higher-risk approach” to pensions with private operators taking the risk instead of the industry’s proposed solution.

Branson agreed, stating “we can’t accept a risk we can’t manage – this would be reckless” and added that forcing rail companies to take these risks could lead to the failure of more rail franchises.

In a separate statement, a Virgin Trains spokesperson said it was “very disappointed by the DfT’s unexpected decision” and was studying it carefully to understand why it had taken this action.

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