Posted 15th August 2012 | 13 Comments

Virgin's Branson hits out at franchise 'insanity'

VIRGIN GROUP founder Sir Richard Branson has expressed irritation that his company has lost the bid for the West Coast franchise. It's the fourth time that his company has been defeated in a rail franchise competition, and he says it is 'extremely unlikely' that it will bid for rail contracts again.

FirstGroup will take over the West Coast intercity service on 9 December, having bid £5.5 billion for a franchise lasting for 13 years and four months.

It is believed that Sir Richard had already sounded a warning to transport secretary Justine Greening about the risks of accepting very high bids, pointing to the failures of two operators on the East Coast Main Line. After today's announcement he made his views public in an uncompromising statement.

He said: "Under our stewardship, West Coast has been transformed from a public liability into a valuable asset for the UK, worth many billions of pounds. The service is a British success story and one to put up against rail companies around the world. It is a great shame that such a strong track record has been discounted in the evaluation process for one of the UK’s most important infrastructure assets. The country's passengers, taxpayers and the West Coast employees deserve better.

“Based on the current flawed system, it is extremely unlikely that we would bid again for a franchise.  The process is too costly and uncertain, with our latest bid costing £14 million. We have made realistic offers for the East Coast twice before which were rejected by the Department for Transport for completely unrealistic ones and therefore will have to think hard before embarking on another bid.

"This is the fourth time that we have been out-bid in a rail tender. On the past three occasions, the winning operator has come nowhere close to delivering their promised plans and revenue, and has let the public and country down dramatically. In the case of the East Coast Main line, both winners – GNER and National Express - over promised in order to win the franchise and spectacularly ran into financial difficulties in trying to deliver their plans.  The East Coast is still in Government ownership and its service is outdated and underinvested, costing passengers and the country dearly as a result.

"Insanity is doing the same thing over and over again and expecting different results. When will the Department for Transport learn?"

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • CT, London

    Whatever. It doesn't matter, they won the bid and that's that. Or is it...?

    As someone who has had the misfortune to travel on overpriced Virgin trains for the past seven years I can honestly say that it's about time... the network may be an "asset for the UK", but for a lot of passengers it just made us sick.

    Or maybe that was the Pendolino trains Richard? I've a good mind to take Virgin to court for the cost of travel sickness medication over seven years, which must amount to... at least a tenner. Not much to someone living in luxury on a Caribbean island.

  • Philip Russell, Carlisle

    It would be good to see Sir Richard set up his own successfull open access operation somewhere on the network however the rail regulators approvals process for these move ,means he would probably be well into retirement before he got the go ahead

  • Melvyn Windebank, Canvey Island, Essex

    I suppose the good news is that FCC may soon be no more!!

    With Southern expanded to cover the new Thameslink area bringing hunting horns to St Albans?

    With the end of Virgin it now means our privitised railways are in the hands of either bus companies or foreign state owned railways. What a shame that British Rail could not have been in the position to take over DB!!

    As for Richard Branson could this be a political decision given hoe he is seen as a supporter of the Labour party and just like Alan Suger his roots are working class and so it not an olde Etonian?

    We should remember how Thatcher killed off Thames TV when it showed a program she did not like and awarded its franchise to Carlton TV whoich had a certain David Cameron among its fold - And I remember how when it was time to start broadcasting someone realised Thames actually made most of the programmes and Carlton planned not to leaving the threat of blank screens!!

    Shame Richard Branson did not set up a TOC with all his trains!!!

  • jak jaye, St Albans

    First Group OK? yea right! im stuck with traveling on their FCC franchise.THE worst railway in the country.
    And DB is dead right why WAS First Group allowed to hand back the GW franchise? answer,i reckon they told the DFT they would withdraw their bid if they were not allowed to.
    As for Virgin while i'm no Branson lover(the man irritates) the rail industry need entrepreneurs like him,and haven't we been here before,shades of Sir Freddie Laker being driven away from the Airline business?. Yes Virgin will be missed,only those dreadful Pendolino's are beyond redemption !

  • Claydon William, Norwich, Norfolk

    Branson should be quiet.

    The franchise 'insanity' of which he speaks lined his pockets with millions. Don't forget SRB owned 51% of the company privately, so he did very nicely out of running the franchise thank you very much.

    .......and I'd love to know from HMRC just exactly what his tax returns looked like........

    He lost, and is just a sore loser.

  • Claydon William, Norwich, Norfolk

    Branson had cultivated this notion with the public that he is this oft-offended valiant 'white knight' doing only public good and battling the big bad uglies of the business world.

    Truth is he's a businessman who personally takes £51 of every £100 of profit Virgin Trains makes. At least 'First' are a quoted company with 100's of 1000's of shareholders sharing the benefit.

    I for one am tired of Branson's whinging particularly in the avaition sector; (where he has also thankfully just lost in the bidding for 'bmi' to British Airways); and I will be glad to see him gone from the rail sector.

    He had an 'anti-competetive' franchise on West Coast, and I hope this is lifted so we can now see real competition on London Manchester with both LM Euston-Crewe and EMT London-Derby services extended through to Manchester.

  • Howard Freeman, Surrey

    No it was not a loophole I agree.
    BUT the payment schedule was loaded into the option period which made the initial contract almost free of charge!
    This is typical of bureaucrats negotiating with experienced and clever business people. The DfT see the large cash number and the operator sees the exit! Truly brilliant!
    FGW are not as bad as you think and have delivered a service on the Western region but don't seem to have the mettle to go through electrification and new trains.
    The Virgin loss is sad but having experienced their ticketing policy I say good riddance. Poky Pendelino (little windows that would have 90% larger on APT) and of course that toilet smell you get as the waste pipes are incorrectly placed should have never been bought and that alone is worth saying good bye to Virgin.
    British Rail was good company that innovated and on WCML made a profit.

  • Billy Bell, Beith, UK

    Virgin have definitely thrown the toys out the pram here. It's up to first to prove everyone wrong now.

    DB, loophole? Try contract clause agreed by DfT at start of franchise!

  • Windsorian, UK

    The FT are claiming Virgin only offered £4.8B in comparison to First's £5.5B.

    Also First Great Western decided not to exercise a 3 year extension on their existing franchise because of the unknown impact of GW electrification, resignalling, IEP trains etc. It's worth remembering at the train companies claimed around £1B in disruption costs during the £9B WCML upgrade.

  • David Faircloth, Derby

    Public liability?

    Wasn't West Coast run at a profit by BR?

    And - if it hadn't been for privatisation - new trains would have been introduced onto the WCML earlier than Pendolinos were; remember the IC225 project?

    By making claims such as this, its difficult fro people to differentiate between spin and fact, and does nothing to enhance Virgin's position; but if statements made by Tony Collins on BBC News 24 are correct, the DfT certainly has some legitimate questions to answer.

    Quite simply, why was the First bid accepted instead of Virgin's when (assuming Collins' statement is correct) Virgin offered more service enhancements than First? Was the premium promised the main determining factor? Certainly, Collins seems to think it was; moreover, he explained why he thought the First bid was unsustainable.

    Interesting times ahead.

  • David , Rickmansworth

    DB, i completely agree. Virgin have transformed west coast and have brought customer service back to the railways. As Richard says, a success story. First are terrible. They completely ruined Hull Trains when they took them over ( i have never travelled with them since) and squeeze there services for every penny they can get.

  • John Ruddy, Montrose

    It wasnt really a loophole - it was an option for extension which they decided not to take up.

    To be honest, First Great Western have done a really good job at working with local communities to provide extra services, and even managed to get DfT to allow them to hire extra trains to run more services... and that's got to be a good thing.

  • DB, Tunbridge Wells

    Why have First won the franchise for WCML? Did the DFT forget that First Great Western found a loophole in their franchise that has allowed them to hand back FGW early to save money!