Posted 15th August 2012 | 15 Comments

Disappointed Virgin to surrender West Coast

FIRSTGROUP has won the next Intercity West Coast franchise, ending fifteen years of operation on the route by Virgin. The announcement may trigger a new controversy, because reports have suggested that Virgin could challenge the decision. The company has said that it is 'disappointed' to have lost the competition.

The winning bid, worth £5.5 billion, is lower than sources had been suggesting. It had been thought that First had offered as much as £7 billion.

The DfT said First West Coast Limited will introduce 11 new six-car electric trains which will boost capacity on the Birmingham to Scotland route. New services are planned from Blackpool, Telford, Shrewsbury and Bolton to London. First West Coast will also cut the cost of its ‘Standard Anytime’ fares by an average of 15 per cent within the first two years.

First said it will refurbish the Pendolino and Voyagers with new seats throughout and improved luggage space. It is also promising to 'enhance' catering with improved at-seat service, although no details have been given. However, First West Coast's managing director Richard Parry has denied speculation that the shop areas on Pendolinos are to be removed to allow more seats.

The contract will start on 9 December this year and last for a minimum of 13 years and four months, with a provision to extend it to 15 years.

First West Coast has provided £10 million of Shareholder Capital, a £45 million Performance bond agreement and a subordinated loan of £190 million. There is also a Season Ticket bond of around £5 million and a £15 million Parent Company Guarantee.

Rail minister Theresa 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 Limited to invest in the future of the service.”

Virgin Rail Group chief executive Tony Collins said: “Naturally, we are all very disappointed by today’s announcement.  We had submitted a strong, deliverable bid with emphasis on customer service which would have produced strong growth over the life of the franchise resulting in significant benefits for the taxpayer through generous premium payments to Government.

"Our efforts for the remaining four months of the current franchise will be to continue to offer a high quality service to our customers, who we would like to thank for their loyalty over the past 15 years, and hand over a healthy and efficient franchise to the new operator on 9 December.”

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • Stephen, Luton

    Can anyone see where the "new" 6 coach EMUs will come from?

    Do the maths :-)

    5 car Voyagers + 1 newly built pantograph coach = 6 coaches

  • Billy Bell, Beith, UK

    Daniel Scullion, I think you are spot on. If this franchise fails then the next step would be to nationalise this route. East coast seems to have settled down now that it is effectively nationalised and the same could be said for Scotrail which is operated by first for the Scottish government under the banner 'Transport Scotland'.

    All being said though, after listening to Tim O'Toole (CEO - first) I don't think the franchise will fail. The company seem to know what they are doing and have plenty of experience behind them and I'm sure they would have taken note of the earlier East coast failures, despite what Virgin say.

  • Michael, London

    As a person forced to edure FGW from Reading to London... I say that anything first group touches is BAD for customers. I moved to Reading 4 years ago because it was only 18 minutes to Paddington and the price was just over £1500pa for a season ticket.
    The time table has been padded out year on year to where the stated journey time is NOW 30 Minutes - so that ALL trains arrive EARLY and the fare as of january 2013 will be £4300pa for a season ticket.
    It is no longer economically viable to be a commuter into London, I will be moving as soon as I can sell my property and move. The extra almost £3k per year, over 10 years more than outweighs the cost differential of living expense that it costs to live in London.

  • Jim Campbell, Birmingham

    Virgin allow Raicard holders to travel in the peaks on off-peak tickets. Will First keep that going. Arriva dropped it as soon as they were able on Cros-Country. Who can I contact to get an answer?

    (In due course, I suggest First West Coast.—Editor.)

  • Paul, Cumbria

    Virgin group have a history of sour grapes and trying to rubbish rivals. Remember the Virgin planes carrying slogans slagging off BA? I would take Richard Bransons comments as the rantings of a bad loser. I suspect as far as most people are concerned all they will see is the trains and staff uniforms will turn blue and that will be about it. Although replacing the awful Diesel Voyagers (another great Virgin idea) from under the wires can only be agood thing.

  • Chris, Arriva Country

    To answer a question earlier in the thread: How will First cut Anytime fares by 15%? Quite easily. They're already severely overpriced, and bringing the price down towards a reasonable level may stimulate sales.

    Something I've not yet found an answer to is whether the silly legacy rules have been stripped out. VWC were the last incumbent to have protection from competition built into their franchise, and it was retained at the last renewal long after it had disappeared from all the other franchise agreements.

    (Our understanding is that the moderation of competition clauses are not included in franchise agreements now.—Editor)

  • Daniel Scullion, Dover

    Remember the same level of thought that got you into the mess you are in never gets you out of it and I fear First Group are about to repeat history and not learn from National Express.

    I am particularly sad as Virgin have over time managed to build a sustainable service and have I believe shown a passion for running a railway well. A railway is also a social service and not just a commodity to be purchased at the highest price for those that can afford it.

    If First Group fail then surely nationalisation has to be the next step as this will be a failed model.

  • zoe rees, london

    Interesting comment Billy Bell, have you travelled on the First Great Western service ? have you travelled on the First Capital Connect cattle service ? how often have you faced First Group 'customer care' ?

    First are the first on everyones list of rubbish providers, and i mean staff as well as public, they will reduce services, reduce staff and then disappear as they are doing on FGW, an appalling decision to give them the franchise and one which will cost the public dear after the initial goodybags have been handed out

    This stupdity will also cost our Government decision makers dear at the next election

  • Billy Bell, Beith, UK

    All doom and gloom from the media about this perfectly legitimate process. Virgin are orchestrating a very negative campaign against first group after they won the bidding process fair and square. I do have some sympathy for virgin because they ran a very good operation but they are fast losing credibility in the way they are reacting to this news.

    As far as great western are concerned, the DfT had a clause in the contract which allowed first to decline the option of extending the franchise for a further 3 years, and they did. Any blame for this surely lies at the door of the DfT, first group merely made a business decision which in my opinion is perfectly justified in the reason given that they would rather bid for the longer term franchise.

    First have done well in the franchise's they currently operate and should be given the credit they deserve in submitting the winning bid which looks good for passengers and taxpayers alike.

    I do hope they come up with a new iconic livery for the prestigious route and don't just apply the dynamic lines as per TPE.

    The ball is in their court and it looks like they have everything to prove!

  • Lee, Manchester

    When First refer to 'enhanced at seat catering' are they actually saying the range of hot food snacks that Virgin previously offerd will be replaced with stone cold sarnies and a cup of hot slutch as offered on their Transpennine trains? Incidentally, has anyone at First group ever tried manhandling one of those wretched trolleys on a conventional train. They seem to be designed to block aisles and bruise ankles. manouvering them around on a train that tilts only emphasises the amount of potential discomfort TOC's can inflict on their customers.

  • David Faircloth, Derby

    It will be interesting to see what we get!

    Remember, the how the press releases for Cross Country promised the restoration of a direct service between Nottingham and Bournemouth? It turned out to be one early morning service, one way only, of no real use as a through service, but great for commuters from Nottingham and Derby to Birmingham. So does Blackpool just get an early morning train to London, and is Bolton served by starting a morning Manchester - Euston service from a bit further north?

    Interesting that the First and DfT press releases suggest that all of the 'Voyagers' are being retained, but disapointing that no mention of them being converted to bi-modes; similarly, no mention about British jobs for the new trains - does this mean that the electrics will not be made at Preston?

    But the bottom line is the lack of transparency from the DfT; why did it go for First and not Virgin if Tony Collins' claim on BBC News 24 is correct? And just how will First deliver fare reductions on Anytime fares without cutting service levels, putting up others by amounts greater than inflation, leasing more trains, investing in stations (more barriers!), etc, ?

    Is this a suitable subject for either the Transport Select Committee, the Public Accounts Committee, or even both?

  • David McDonald, Rickmansworth

    Sad sad day. The government saw the money and run not thinking of the customers.

  • Graham, Hook

    First opted not to extend the franchise on the Great Western to include the optional extra period. That means that as the West Coast Intercity franchise is set to running for 13 years and 4 months from December 9 2012, with an optional extension to a total of 15 years that First have to run it for 13 years and 4 months before they can do the same as the did at Great Western.

  • John Ashworth, Birmingham

    Sad, sad day. It's seems that the promise of new seats will come at a heavy cost. Not to the customer but to the hundreds of staff that will no doubt loose their jobs for First to achieve this.

    6 car emus on Brum-Scot route, is this the long awaited IEP project? Goodbye Virgin Trains, you have left a legacy that no other toc will be able to live up to.

    Horizon Trains.... Best of luck. Your going to need it!!

  • Graham LEES, KENSINGTON

    As First Group chose to walk away from its commitments on the Great Western, what guarantee is there that they will not do the same as soon as the burden becomes too great on West Coast?

    With regard to promised "improvements", I hope the new seats will not be the high backed type they've introduced on Great Western, that mean you cannot see anything unless you are sitting in one of the very few bay seating areas.

    Like (I imagine) many others, I'm not optimistic about this new franchise, and the process that led up to it.