Virgin Rail holds talks with DfT for greater revenue chunk of West Coast service

MANAGEMENT at Virgin Rail Group is holding talks with the Department for Transport on a deal which could see the West Coast Main Line operator take a greater revenue chunk from the service.

Transport group Stagecoach, a minority stakeholder in VRG, said in a trading update that the group continued to earn a fee equivalent to 1% of revenue from the West Coast rail franchise with the DfT taking the risk that revenue and/or costs differ from those expected.  

It added: “VRG and the DfT are discussing revised commercial terms that could see VRG take greater revenue and cost risk for the period from a date to be agreed through to April 2017 for a commensurate financial return.”

VRG had been the WCML franchise holder until the DfT opted to award a new franchise to FirstGroup last year. However, in a fiasco for the Department it was forced to scrap the offer when the FirstGroup bid was deemed unsustainable.

VRG is now continuing to operate the service for the DfT until revised contract terms can be agreed and a fresh franchise is launched.

Latest figures from Stagecoach show a like-for-like revenue increase of 6.1% in VRG for the 24 weeks ended October 13, 2013.

The group’s rail operations as a whole were said to be in line with expectations.
It said as expected, the rate of revenue growth was lower than that reported for the first 12 weeks of the financial year, partly due to the effects of non-recurring revenue in 2012 related to the London Olympic and Paralympic Games and current year resignalling work in the Nottingham area.

 It continues to hold talks with the DfT on planned extensions to its South Western Trains and East Midlands Trains franchises.  

“We look forward to shortly receiving the pre qualification material for the new East Coast franchise and will evaluate this opportunity in conjunction with Virgin, our joint venture partner on the current West Coast franchise,” it added.
Overall, it said current trading was good and the prospects for the group remained positive.
The group will announce its interim results for the six months ended October 31, 2013 on December 11.