DfT decision to extend Midlands rail operations will increase the value of Virgin says operator

A DECISION by the Department for Transport to extend rail operations in the Midlands will increase the future value of the Virgin Train Group, a major rail stakeholder has said.

Stagecoach is a major UK rail operator, running the South West Trains, Island Line and East Midlands Trains networks. It has also partnered with Virgin – in which it has a 49% stake – to run the East Coast and West Coast inter-city rail franchises.

Martin Griffiths, chief executive, Stagecoach Group, said the operation was performing ahead of expectations. However, as the franchise agreement included protections for taxpayers which limit the level of profit that the business could earn, there was limited scope for further profit growth.

“We are pleased that the Department for Transport has agreed to extend our operation of East Midlands Trains and plans to extend Virgin Rail Group’s operation of West Coast Trains,” he said.

“This will allow us and Virgin to continue to deliver improvements to our customers, attract more people to rail travel and increase the future value of these franchises to Government.”

In its latest interims, covering the six months to October 31, 2015, Stagecoach said Virgin had benefited from increased usage, which had had a beneficial effect on revenue and profits.

Its 49% share in the Virgin Rail Group saw a like-for-like revenue increase to £270m (H1 2014: £247.4m), while pre-tax profit rose to £13.5m (H1 2014: £9m).

Griffiths added: “Virgin Rail Group’s West Coast rail franchise continues to perform strongly and that is benefitting taxpayers through profit share payments by the business to the Department for Transport.
 
“The DfT has indicated that it plans for the current franchise, which commenced in June 2014, to run until March 31, 2018 on the commercial terms already agreed.”
 
In October 2015, West Coast Trains became the first train company to automatically compensate some customers if they are delayed.  A customer who buys an Advance ticket through virgintrains.com or the app will automatically receive money directly back on their payment card when their train service is delayed by 30 minutes or more.  

Stagecoach said this was a good example of private sector innovation delivering customer improvements commercially without the need for overly restrictive contractual commitments or government intervention.