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Stagecoach and Virgin joint-venture wins east coast mainline franchise Stagecoach and Virgin joint-venture wins east coast mainline franchise
(about 7 hours later)
Virgin Trains will be operating on both rail routes linking London and Scotland next year after being awarded the franchise for the reprivatised east coast main line.Virgin Trains will be operating on both rail routes linking London and Scotland next year after being awarded the franchise for the reprivatised east coast main line.
The new company running the London-Edinburgh trains on the east coast will be Inter City Railways, a separate joint-venture 90%-owned by Stagecoach, and the trains will be branded Virgin Trains East Coast. Sir Richard Branson retains a 10% stake. The new company running the London-Edinburgh trains will be Inter City Railways, a joint venture 90%-owned by Stagecoach with the trains branded Virgin Trains East Coast. Sir Richard Branson retains a 10% stake.
It had been rumoured that Keolis and Eurostar, two partners controlled by the SNCF, France’s state-owned rail company, would win the franchise. The Department for Transport said the franchise would lead to 23 new services from London, including plans for direct links to Huddersfield, Sunderland and Middlesbrough, and more daily services on the route. Seat capacity will increase by 50%, with 65 new Intercity Express trains brought into service from 2018, cutting journey times from London to Edinburgh by 13 minutes. The award defused some of the political controversy after rumours in the City that the franchise would go to Keolis and Eurostar, two partners controlled by France’s state-owned rail company SNCF.
East coast has been a focus for controversy over rail franchising since the state-owned company that had been successfully running the line since 2009 was forced to relinquish control. In the last financial year, Directly Operated Railways (DOR) paid £225m to the government, making a total of more than £1bn in premiums over the five years since it stepped in to rescue the London-to-Edinburgh route from National Express. Unions have condemned the reprivatisation of the service, which has performed well in public hands over the last five years, recording strong customer satisfaction scores while returning all profits to the Treasury – making payments of £1bn in total.
The Department for Transport said the franchise award would lead to 23 new services from London, including plans for direct links to Huddersfield, Sunderland and Middlesbrough, and more daily services on the route.
Seat capacity will increase by 50%, with 65 new Intercity Express trains brought into service from 2018, cutting journey times from London to Edinburgh by 13 minutes.
East coast has been a focus for controversy over rail franchising since the state-owned company that had been successfully running the line since 2009 was forced to relinquish control. Directly Operated Railways (DOR) stepped in to rescue the London-to-Edinburgh route from National Express, which could not deliver the payments it had promised in its contract. The arms-length operator paid £225m to the government in the last financial year.
The transport secretary, Patrick McLoughlin, said: “This is a fantastic deal for passengers and for staff on this vital route. We are putting passengers at the heart of the service. I believe Stagecoach and Virgin will not only deliver for customers but also for the British taxpayer.”The transport secretary, Patrick McLoughlin, said: “This is a fantastic deal for passengers and for staff on this vital route. We are putting passengers at the heart of the service. I believe Stagecoach and Virgin will not only deliver for customers but also for the British taxpayer.”
He said the premium being paid to government would total £3.3bn over the eight years. He said the premium being paid to the government would total £3.3bn over eight years. According to Stagecoach, the premium totals £2.3bn in real terms at 2014 prices.
McLoughlin said DOR could not bid, because having the DfT-owned company running the line was always a “stop-gap measure”. McLoughlin said DOR could not bid, because having the company owned by the Department for Transport running the line was always a “stop-gap measure”.
Branson said: “Our long and fruitful partnership with Stagecoach has revolutionised the west coast line and train travel in the UK, and we are looking forward to bringing the lessons we have learnt across to the east coast and building on the success there.”Branson said: “Our long and fruitful partnership with Stagecoach has revolutionised the west coast line and train travel in the UK, and we are looking forward to bringing the lessons we have learnt across to the east coast and building on the success there.”
Martin Griffiths, the chief executive of Stagecoach Group, said: “We have some fantastic ideas to deliver a more personal travel experience for customers. Investing in the committed people who will make that happen is a big part of our plans, giving opportunities for them to develop and grow into more senior roles.”Martin Griffiths, the chief executive of Stagecoach Group, said: “We have some fantastic ideas to deliver a more personal travel experience for customers. Investing in the committed people who will make that happen is a big part of our plans, giving opportunities for them to develop and grow into more senior roles.”
Mick Cash, the acting general secretary of the RMT rail union, said the reprivatisation was a “national disgrace”. Stagecoach, which runs the South West Trains and East Midlands Trains networks, said the franchise would lead to £25m being invested in station enhancements including a free wireless network, 50% more bike storage and more car parking spaces. The independent watchdog Passenger Focus said: “Passengers travelling on the East Coast will welcome knowing who will be running their services from March. Inter City Railways will inherit a business that passengers tell us they rate highly, but there is still room for improvement.”
He said: “ While domestic public ownership puts money back into the coffers that can be reinvested in our railways, the private operators, overwhelmingly owned and controlled by European state rail outfits, suck out colossal sums in subsidies and profits – that’s what privatisation means.“ Unions said returning the east coast to private hands would benefit shareholders and not passengers. The TUC general secretary, Frances O’Grady, said: “The government’s rush to sell off the east coast mainline before the election is a purely ideological move that’s not in the interests of taxpayers or passengers. It’s an example of politics trumping logic.
About three-quarters of Britain’s railways are now run in full or part by subsidiaries of foreign, state-owned rail firms, including DeutscheBahn’s Arriva, the Dutch-owned Abellio and Keolis, 70%-owned by the SNCF. The government is also preparing to sell its stake in Eurostar, almost certainly to the SNCF, the majority owner. “By privatising the east coast mainline the government is passing the profits to corporate shareholders, instead of using the cash to reduce rail fares and improve services for passengers.”
Mick Cash, the acting general secretary of the RMT rail union, said the reprivatisation was a “national disgrace”. He said: “While domestic public ownership puts money back into the coffers that can be reinvested in our railways, the private operators, overwhelmingly owned and controlled by European state rail outfits, suck out colossal sums in subsidies and profits – that’s what privatisation means.”
About three-quarters of Britain’s railways are run in full or part by subsidiaries of foreign, state-owned rail firms, including Deutsche Bahn’s Arriva, the Dutch-owned Abellio and Keolis, 70%-owned by SNCF. The government is also preparing to sell its stake in Eurostar, almost certainly to SNCF, the majority owner.
McLoughlin said: “I am delighted to see foreign companies investing in this country, bringing jobs to this country and revenue to the exchequer.”McLoughlin said: “I am delighted to see foreign companies investing in this country, bringing jobs to this country and revenue to the exchequer.”
The defeat will come as a further blow for First Group, the other bidder on a shortlist of three, which has missed out on a string of rail franchises since the west coast fiasco in 2012, including the recent loss of both the Thameslink and Scotrail franchises, which it had been operating. Its share price slumped this week on rumours of the loss. The independent watchdog Passenger Focus said: “Inter City Railways will inherit a business that passengers tell us they rate highly, but there is still room for improvement.”
The award will come as a further blow for First Group, the other bidder on a shortlist of three, which has missed out on a string of rail franchises since the west coast fiasco in 2012, including the recent loss of both the Thameslink and Scotrail franchises, which it had been operating. Its share price slumped this week on rumours of the loss.
The new east coast franchise begins on 1 March 2015.The new east coast franchise begins on 1 March 2015.