The news that Virgin Rail may no longer be operating any rail franchise in the future has come as a great surprise, not only to the travel trade, but to Virgin itself. The surprise move by the Department for Transport to disqualify the bids for the West Coast route, along with two other bids for separate franchises, which were renewable this spring, should be of great concern to all.
The problem appears to be that the Stagecoach/Virgin bid did not allow for an open-ended contribution to top-up pension funds that accumulated many years ago prior to privatisation. It is understandable that the bidders were reluctant to take on that possible unknown cost, which could accumulate for the future, but of course, those employees that are in the pension fund need to be protected, so the rights and wrongs of the challenge are not easily resolved. The decision has been taken on the basis of financial commitment, rather than the operational aspects of the bidder.
There is no question that Virgin/Stagecoach has transformed rail travel in this country. Whilst not perfect, the London/Birmingham/Manchester/Glasgow services are booming and much is down to the frequency, speed, and indeed comfort - and the service provided.
However, it may be more to do with the problems last year, when Stagecoach was a 90% shareholder in the East Coast debacle that was terminated during the summer. The joint venture had breached a key financial covenant by not being able to pay up to £3.3bn which was in their original bid. Virgin and Stagecoach lost around £200m, while the franchise had returned approximately £1bn in premium payments to Government, so - is the DfT punishing the rail operator for failing last year?
The timing of the announcement seems to be particularly odd, because the three bids (First Group and Trenitalia), (MTR and Guangshen Railway Company) and (Stagecoach, Virgin and SNCF) were lodged last summer in July. So why has it taken this long to disqualify the bid when the announcement for the successful bidder will be made in June this year - some 11 months after the bids were received?
No doubt there will be further information unfolding as things become clearer, so it must come as a disappointment to passengers and the travel trade alike, especially as Virgin is one of the few trade-friendly rail operators.