FirstGroup beats Virgin Rail to West Coast franchise
TRANSPORT business FirstGroup has ousted Virgin Rail as operator of the important West Coast Mainline rail service.
Confirmation of the appointment was made in an announcement by the Department for Transport this morning.
It is thought FirstGroup may have outbid Sir Richard Branson’s company by around £1bn but there are now concerns that the successful tender for the 14-year contract, which starts in December, could lead to hundreds of job cuts as the new franchisee looks to fund service changes.
The announcement made little impact in early trading with FirstGroup shares up just over 2%.
Rail Minister Theresa Villiers said commuters using the London to Scotland service, which connects with major rail hubs such as Birmingham’s New Street Station, could look forward to a series of improvements, including more trains and extra seats.
As part of the deal, new company First West Coast Ltd will introduce 11 new six-car electric trains which will create greater capacity on the Birmingham to Scotland route. New services are planned from Blackpool, Telford, Shrewsbury and Bolton to London.
First West Coast has also committed to cut the cost of its ‘Standard Anytime’ fares by an average of 15% within the first two years.
The franchise stretches from London to Glasgow, connecting many of the UK’s major cities including Manchester, Liverpool, Birmingham, Wolverhampton, Edinburgh, Lancaster and Chester. The franchise deal is worth £5.5bn (net present value) over the lifetime of the contract.
Ms Villiers said: “This new franchise will deliver big improvements for passengers, with more seats and plans for more services. Targets to meet on passenger satisfaction will be introduced for the first time in an InterCity rail franchise and passengers will also benefit from smart ticketing and from investment in stations.
“The West Coast is the first of the new longer franchises to be let by the coalition which has helped us secure real benefits for passengers by encouraging First West Coast to invest in the future of the service.”
FirstGroup chief executive Tim O’Toole said: “We are delighted to be selected by Government to operate this unique railway which connects communities across the country and plays a vital role in the UK’s economic growth.
“Our winning bid is a deliverable proposition that is compelling for all who want to see a greater use of our rail networks. We will be making significant improvements including reduced journey times and introducing new direct services.
“We will improve marketing and deliver a smart ticketing system, refreshed and improved train interiors, station upgrades and even better catering. In support of our commitment to generate increased passenger growth we will be reducing Standard Anytime fares by 15% on average.”
Aware of speculation regarding possible cutbacks, he pledged that the group would continue to invest in front line staff.
Virgin Trains, part owned by Stagecoach group, has operated the West Coast franchise since 1997.
Both parties said they were bitterly disappointed to have lost the franchise and said their bid had been submitted “on terms that resulted in an acceptable risk-reward profile and which would add value to the partners’ shareholders”.
Stagecoach said it understood its bid was the DfT’s second choice and the reason it failed to secure the new franchise was because FirstGroup contracted to pay significantly higher premium payments to the DfT.
“We considered that a number of the features of the new franchise increased the risk to the train operating company relative to other franchises awarded over recent years,” it said.
