Virgin Trains could disappear from British railways as soon as November, founder Sir Richard Branson has announced.
The rail operator was informed today that it would lose its West Coast line franchise, following a Government row with its partner Stagecoach.
The Department for Transport (DfT) informed Stagecoach, which owns 49% of Virgin Rail, that it was disqualified from bidding because they did not meet pensions rules.
Virgin has already suffered the loss of its East Coast contract after the Government reclaimed control over the line last year.
Sir Branson issued a statement in response to the news saying he was “devastated for the teams who have worked tirelessly to make Virgin Trains one of the best train companies in the UK, if not the world”.
“Virgin Trains has led in the industry for more than 20 years and we wanted this to continue for many more years,” he added.
“Running the railway comes with many challenges and the West Coast Main Line was struggling when we took it over, but we were determined to turn it around.
“We’re baffled why the DfT did not tell us that we would be disqualified or even discuss the issue – they have known about this qualification in our bid on pensions for months.”
Stagecoach was bidding on three franchises – East Midlands, South Eastern and the West Coast partnership with Virgin – when the DfT announced its disqualification for submitting “non-compliant” bids.
The Department’s decision focused on Stagecoach’s unwillingness to bear the long-term funding risk for railway pensions during the eight-year franchise period.
"The Pensions Regulator has indicated that an additional £5 billion to £6 billion would be needed to plug the gap in train company pensions,” said Stagecoach chief executive Martin Griffiths.
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“We are extremely surprised that the Government still expects private operators to take risks they are not best placed to manage, despite the recent difficulties experienced by a number of operators of outsourced public-sector contracts.”
A DfT spokesman defended the decision, saying it was “regrettable” that Stagecoach has submitted bids which “breached established rules”.
“Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. They are responsible for their own disqualification,” the spokesman said.
Sir Branson said Virgin Trains had “significant concerns over the latest developments and their implications for the future of the UK rail market.
“Our first priority is always to look after our teams. The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions.
“We can’t accept a risk we can’t manage - this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.
“We are still looking closely at the decision and we are now considering our options.
The billionaire business magnate ended his statement by thanking the Virgin team for “their hard work and dedication”.
“It’s not easy working in the midst of uncertainty. Let’s continue to bring the Virgin magic to train travel that only we can.
