Virgin Trains faces end of the line after franchise bid shock

Virgin Trains, which operates the main London and Glasgow links between Liverpool and Manchester, could disappear from UK rail schedules, it has been claimed.

The train operator’s bid partner, Stagecoach, has been barred from three franchise bids after the Department for Transport (DfT) said the bids did not meet industry pension rules.

Scottish transport group Stagecoach owns 49% of the Virgin trains business.

The two partners, and French rail group SNCF, had submitted a joint bid to renew the West Coast fanchise starting next year.

Stagecoach had also lodged bids for the East Midlands and South Eastern franchises, which have also been rejected.

It had bid independently for the East Midlands franchise, intended to partner with Alstom for the South Eastern operations, and was jointly bidding for the West Coast Partnership with Virgin and SNCF.

The DfT yesterday announced that the East Midlands franchise had been awarded to Abellio “after they presented a strong, compliant bid”.

Stagecoach shares fell 9.3% in Wednesday trading.

Virgin founder, Sir Richard Branson, said he was “devastated” by the development.

In a blog on Virgin’s corporate website, Sir Richard said Virgin Trains “could be gone from the UK in November”.

The blog continues: “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.

“The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions.”

The blog said: “We can’t accept a risk we can’t manage – this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.”

Martin Griffiths, chief executive of Stagecoach, has called for an “urgent meeting” with the DfT.

He said in a statement: “We are extremely concerned at both the DfT’s decision and its timing. The department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.”

However, a DfT spokesman said: “Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions.

“It is regrettable that they submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.

“Stagecoach chose to propose significant changes to the commercial terms for the East Midlands, West Coast Partnership and South Eastern contracts, leading to bids which proposed a significantly different deal to the ones on offer.”

He added: “It is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”

Virgin Trains said in a statement: “We’re very disappointed by the DfT’s unexpected decision.

“We’re studying the DfT’s decision carefully to understand why they’ve taken this action and would like to reassure all our customers that they can still book and travel as normal.”