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Virgin-Stagecoach wins East Coast franchise bid

Virgin and Stagecoach have won their bid to run the East Coast Main Line, beating rivals FirstGroup and Keolis/Eurostar.

Inter City Railways, the consortium of Virgin and Stagecoach, will run the franchise until 2023, starting in March next year. The trains will be branded ‘Virgin Trains East Coast’, Stagecoach has confirmed.

The new operator will pay the Department for Transport a premium of £3.3bn over the next eight years and has agreed to invest £140m into train and station improvements.

Transport secretary Patrick McLoughlin said that Inter City Railways won out because of the quality of their bid as well as the financial offer. Virgin Trains, itself a consortium of Virgin and Stagecoach, currently has only one other franchise: the West Coast. This new win means it controls two of the most prestigious and important routes in the country.

From 2018 the new franchise will see the introduction of 65 new Intercity Express trains, totalling 500 new carriages.

The new trains, to be assembled at Hitachi’s factory in Newton Aycliffe, County Durham, will be rolled out in stages. By 2020 all of the 65 modern high-speed electric trains will be in service and will replace 39 existing trains.

They are expected to create 3,100 extra seats for the morning peak by 2020, and 12,200 across the entire fleet, an increase of 50%. Additionally they will see journey times from London to Leeds reduced by 14 minutes and from London to Edinburgh by 13 minutes.

The programme of improvements also includes complete refurbishment of the existing fleet, improved on-board wi-fi and catering, improved ticket offices, more ticket vending machines and more car parking and cycle spaces at stations. The DfT has published an interactive route map detailing the proposed improvements and benefits.

The new deal will also see the introduction of 23 new services from London, with 75 more station calls a day. The services include plans for new direct links to Huddersfield, Sunderland, Middlesbrough, Dewsbury and Thornaby, pending approval from the Office of Rail Regulation.

There are additional proposals for more trains to London from Bradford, Edinburgh, Harrogate, Leeds, Newcastle, Shipley, Stirling, and York. Lincoln will see its links to London improve from one service a day to one every two hours.

Inter City Railways has also given a commitment to reduce all long-distance standard anytime fares by 10%.

McLoughlin said: “This is a fantastic deal for passengers and for staff on this vital route. It gives passengers more seats, more services and new trains.

“We are putting passengers at the heart of the service. I believe Stagecoach and Virgin will not only deliver for customers but also for the British taxpayer.”

Martin Griffiths, chief executive of Stagecoach Group, said passion for customers, employees and communities are at the heart of the consortiums plans for the franchise.

“We have some fantastic ideas to deliver a more personal travel experience for customers,” he said. “Investing in the committed people who will make that happen is a big part of our plans, giving opportunities for them to develop and grow into more senior roles. At the same time, we have developed major programmes to help young people, communities and small businesses along what is one of Britain’s major rail routes.”

Patrick McCall, senior partner at theVirgin Group, added: “Our long term partnership with Stagecoach has seen a revolution in customer service standards, product innovation, reduced journey times and improved timetables on the West Coast mainline.

“We have a great opportunity to blend the successes of the East Coast and the West Coast lines to create a great experience for all.”

Following the announcement, and in accordance with usual procurement practice, there will be a standstill period of 10 days before the department will be in a position to complete the formal contractual documentation and make the award to Inter City Railways.

Not everyone is happy with the new franchise announcement. Unions are angry that the government chose to hand the franchise back to the private sector after five years being run by the state-owned Directly Operated Railways, who were widely judged to have performed well. Under Labour plans, DOR or an equivalent would be able to bid against private operators for franchises.

Mick Cash, RMT general secretary said the contract was "an act of utter betrayal".

"The government has confirmed that it is bulldozing ahead with the re-privatisation of the East Coast Main Line despite all the figures showing that the current public sector operator is handing over a billion pounds back to the British people while delivering huge improvements in service and customer satisfaction."

Rumours had earlier been circulating, as reported by RTM, that French state-owned Keolis and Eurostar were the favoured bidders for the East Coast line, but these have proven unfounded.

It is more bad news for FirstGroup, which has lost or failed to win five train franchises in the past six months. Its shares have been testing new lows.

Tim O’Toole, FirstGroup’s chief executive, said: “Our bid for the East Coast franchise was ambitious yet realistic. Had it been selected, it would have created a world class railway for passengers and value for taxpayers with a balanced level of risk and returns for shareholders.

“As one of the UK's most experienced operators, we remain committed to the rail market but we are dissatisfied not to have secured any of the franchises that have come up for tender in this first round.”

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