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Virgin boss Richard Branson has taken to doing a bit of angry blogging, launching an attack on the government for handing Virgin’s prize West Coast Main Line train franchise to rival operator FirstGroup.
Branson’s furious blog post claims the decision is madness and is likely to end in the winning bidders running into financial trouble, due to them bidding more than it’s possible to pay while maintaining a decent level of service; the same issue that caused National Express and GNER to lose their East Coast line contracts when they ran out of cash.
Branson said: “Insanity is doing the same thing over and over again and expecting different results. When will the Department for Transport learn?”
“Under our stewardship, the West Coast Mainline has been transformed from a public liability into a valuable asset for the UK, worth many billions of pounds. The service is a British success story and one to put up against rail companies around the world. It is a great shame that such a strong track record has been discounted in the evaluation process for one of the UK’s most important infrastructure assets. The country’s passengers, taxpayers and the West Coast employees deserve better.”
It does seem extremely mean of the government to kick out Virgin Trains. The company has done a good job of modernising its stretch of the line, and its trains, while other sections rot away. Snatching it away and handing it over to someone else now the tough work’s already been done isn’t much of a reward for Virgin’s investment.
Virgin’s been running the West Coast rail franchise for some 15 years, claiming to have doubled passenger numbers over that time and stealing a lot of traffic from the East Coast line. Virgin bid around £5.5bn £6bn to run the line, with FirstGroup pledging around £6.5bn to £7bn instead. That extra billion was enough to get the government to ditch Branson’s trains for its rival in these cash-strapped times.
FirstGroup says it’ll be improving things, though, sticking on 11 new 125mph trains on the Birmingham-Scotland stretch, as well as making the crowd-pleasing promise of faster Wi-Fi across the network. FirstGroup takes control of Virgin’s line this December and has a 13-year run at making a go of it. [Virgin via Telegraph]
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He could start Virgin West Coast Hot Air Balloons.
Probably be faster than the train service from firstgroup.
They can just about run commuter services (GE, Transpennine, etc…) but I wouldn’t trust them with anything intercity!
Does anyone else think that Richard Brason would be like denholm off the IT Crowd?
All I had when I started this business, was a dream…
…and SEVEN MILLION POUNDS
No no no the other 1 what was his name arghhhh
I could just imagine in that picture that branson had just shot himself in the leg and was just about to die, and his dying comments are “i had every last one of them”
Oh Matt Berry?
This is a disaster waiting to happen, I also think Richard should have got the lottery when he bid for it. I give it three years before the new company goes tits up.
Apparently FirstGroup are planning on running direct services from London to Blackpool. Given the length of the platforms at Blackpool and FirstGroup’s comment about the 6 coach services from BHM to Scotland, I assume they’re planning on actually reducing capacity on the WCML by flooding all the routing slots with short trains!
Also is the demand really there? Most people that go to Blackpool come from other places in the northwest on Northern Trains (which are the worst provider I’ve used so far)
I think that’s subtly part of their plan – They’ll supplement the First Transpennine Express service with trains from London which, if it stops at Preston might not be so bad.
The problem is that I’ll bet they’ll try to do the same as Hull trains do, and run the service direct rather than actually stopping anywhere else, in which case it really is going to be useless!
Northern are ok, given the fact that they’re dealing with appalling lines and ancient rolling stock, however the number of services could do to be improved.
I guess Northern do run it on time a lot of the time. I think it’s the ancient rolling stock which makes the journey seem so much longer especially when they break down which makes me dislike them.
Interesting read from the source article in the Telegraph. On Firstgroups past tender failures, Bransons logic on the numbers he presented. Sure, he has sunk alot of money into it, but it does sound as if he has a genuine concern regarding service delivery.
Agreed – especially given FirstGroup’s failure on the Great Western franchise, they only escaped what looks to have been significant losses because of a clause in the contract, so they do the same again!
Branson was offering to pay about £423 million/yr, over 2.5x the contract they’re just finishing, versus FG who seem to believe they can afford 3x the previous fee. In this instance Branson generally does know what he’s talking about – he wouldn’t be putting in a bid if it wasn’t financially viable for both him and Stagecoach. He’s right, they have delivered on what was a frankly appalling line 10 years ago, let alone when they first took the contract, and I don’t think First can even come close.
Last year Virgin Trains made around £44M in profit down from £80M the previous year despite more passengers, higher revenue and limited investment in new stock.
First Group Trains made £110.5M up from £88M with more passengers and higher revenue despite further investment in their Rail segment, including on their Great Western franchise which they lose next year.
As for the Great Western Franchise – there was an extention clause in the contract, as there always is, so they didn’t pull-out of the contract, they simply didn’t extend. If you look at the actual situation with the franchise, specifically the planned electrification starting next year, there will have to be signficant rolling stock investment over 2013-2016 to ensure they are sutiable to use the new electified lines – it fundamentally changes the nature of the franchise and therefore the costs and the contract potential.
The Govt used the same clause to remove the Greater Anglia Main-line from National Express last year after they adandoned the East coast line mid contract.
First he complains about losing BMI to a higher bidder, and now he complains about losing a rail franchise to a higher bidder. It is almost like he doesn’t understand how business works!
He is whining about losing a franchise which many users complain about, and he did so because he simply didn’t offer the best deal. It is like someone complaining they lost out on buying a house because they offered half as much as the eventual buyer and claiming they should’ve got it because they would’ve taken better care of the house and the other person might struggle to pay the mortgage.
I’ve used Virgin trains and they were simply awful to the point where I actually used to take the slower Chiltern trains to get into London even though it added at least 30-40 minutes each way.
I dislike First group, they did nothing to benefit the Great Anglia line I now use, but Branson seems to think his companies should get things because it is Virgin and he is Richard Branson. I hope this wipes that stupid smug smile off his face for a few days.
Grossly missing the point of Branson really, almost to the point that you’re more interested in wiping a smug smile off a face or actually realising that First Group could descend the West Coast line into the dark ages again.. You’d think that for someone who has ran that line since 1997 he has a fairly good idea of how that line operates and how much it costs to run.
It isn’t as black & white as you want to put it, and the ‘best deal’ isn’t necessarily the one which pays the most. That’s nothing but naivety & given that National Express defaulted and handed over the east coast line to the government, Branson’s bid was competitive enough but not simply lining the pockets of what is financial suicide. I wouldn’t be surprised if the West Coast line ends up like the East Coast did when National Express defaulted.
First Group offering £6.1bn extra (insane!) and the guarantee of enhancing the network means the only people it’s going to look to recoup the cost of the network upgrades and the £6.1bn from the fares. So either way the public lose out.
We need bids to be low to keep the rail service competitive. Virgin made that West Coast main line into an excellent service. I doubt i’ll be saying the same about First Group.
When you considered the total potential expenditure included in the bigs, First Group’s bid was around £13bn compared to Virgins’ £11bn. Maths was never my strong point but I’m not seeing the £6.1bn difference.
What I find utterly bizarre is that so many people are instantly criticising First Group because they won a franchise with a whole host of passenger directed improvements, rolling stock upgrades and line development plans.
People seem happy to take the view that Virgin rail couldn’t pay any more because there isn’t any more to pay because Branson said there wasn’t. Despite the fact that last year revenue increased, passanger numbers increased, investment decreased, and yet somehow profits also decreased.
I don’t think it is black and white at all, and yet ironically your answer seems to imply it is – Virgin good, First Group bad. People are so happy to criticise the decision without even looking into the details for First Group’s bid, or their plan for the franchise. And worse still, people seem to think that Branson is telling the truth even though he is the aggrieved party in all of this so of course would be against the decision.
I think your comments have been well thought out, to the point and well worded, to the extent I am going to follow you with quite women interest…
Saying that I disagree with your viewpoint and the arguments you have put forward (even with supporting info).
As a midlands to London commuter (admittedly first class) virgin is in a different league to other providers. This may seem a bit elitist- but first class is full every day.
Branson has repeatedly proven good business plans where people “feel” they get some value for what they pay. This is not some kind of “bransomism” it’s as the service is good, the quality is good, the customer feedback is valued.
Compare that to the track record of the alternatives. Simply they are optimising against the contract to maximise profit rather than building good business looking at the track record.
I am oversimplifying I know, but this is a case where free enterprise delivered and has also failed, ad the system has been mproved and made profitable, and will now be squeezed by another company for 13 years to maximise profit when they have a proven track record of no innovation and failure.
I work for a (large) investment co (though I do feel dirty as m an engineer)- I know who I would have put money into for growth capital rather than vulture funding.
Again- respect your points, but cannot agree with my own experiences….
Funny, it wasn’t that long ago that Virgin Trains was being pilloried as the worst train provider on the planet. Plus ça change…
Couple of choice comments from the BBC News story:
“Child A and Child B both want to buy the same pet hamster. They both have £10 to spend.
Child A offers £3 for the hamster, knowing that they’ll need the other £7 for food, toys, a cage and water – Everything to help the hamster survive.
Child B offers £10, so gets the hamster.
The hamster then dies of starvation.”
“The govt certainly haven’t considered whether customers are satisfied: First Great Western – approval rating 72%
First Capital Connect – approval rating 71%
Virgin West Coast Mainline – approval rating 91%
This is about cash upfront and not what’s best for the paying customer.”
Yep, It’s about balancing the Governments accounts before the next election. I would also not be surprised to discover that the Transport Minister and the head of First group were at Eton together.
That’s interesting. I think he has every right to be angry and publicly critical/disappointed, having read a handful of the articles on the matter this morning.
I certainly wouldn’t describe his reaction as ‘berserk’. Quite unfair.
In order for that comparison to make sense – how many passangers use Virgin compared to First Group’s services.
It may be that First are paying more, but we have yet to hear any details from Virgin about how they were actively going to improve the service. First group’s offer was only 15% higher than Virgin’s and their figures were based on a 5% operating margin, which is what Virgin currently have. They have already stated that they will reduce certain fairs, refurb all rolling stock during the first two years of the franchise.
When I used to have to travel down fom the midlands I would choose the slower Chiltern trains over the Virgin because they were just awful!
Branson is getting a lot of attention because he can mouth off when the facts are that he has now lost his last rail franchise in the UK and sadly people would rather believe in the empty words of the head of a failed rail operator than the business plan of the biggest rail operator in the UK & one of the biggest transport operators in the UK and USA.
If you’re going down the statistics manipulation route, what percentage of First Group passengers filled in the survey vs Virgin? Out of those that took the time to respond to the survey who use either franchise, the satisfaction rating for the Virgin WCML is 19% higher than First Group’s.
Considering the major refurb that the rolling stock went through when Virgin bought them in the first place, I’d say it’s completely unnecessary. What they more likely mean is a complete rebranding of the rolling stock.
How long ago were you travelling down to London? I agree that 6/7 years ago the services left a lot to be desired, but they have steadily improved.
Given the performance and service experienced on the last 50 Virgin trains I’ve been on versus the last 50 First Group trains, yes, I’d rather listen to Branson!
I wasn’t going down the route of statistical manipulation at all, I was just curious as the how applicable they are. simply because London commuter lines tend to get a higher volume of traffic then the other mainlines. From my experience my fellow commuters are more likely to fill-in surveys when they have something to complain about. Whilst I know Virgin gets a chunk of commuters, it is also has a fair amount of non-commuter traffic.
I used the network about 5 years ago and then again last year and whilst I agree they have improved, I still think that Chiltern are far better even though they were slower than Virgin. First aren’t great, I have no affinity to them whatsoever, but the trains I’ve taken from London have been no better or worse than Virgin and their bid was only 15% higher than Virgin so I don’t think it will be quite the disaster Branson is making it out to be.
I’m not sure it is just a rebranding, which is what I’m having endure on the Greater Anglia line – lovely new paint but still stupid little windows and no bloody a/c on ancient stock. First group have included things like on-train facilities and wi-fi improvement in their refurbishment programme as well as refresh.
And besides, I make it a general policy never to listen to Branson because whenever decisions go in his favour it is because he’s the bestest ever and everything will be amazing, but when he loses out it is all doom and gloom, and totally unfair.
Tough shit.
When Richard Branson moans about how unfair capitalism is why stop at kicking him in the teeth?
3 years and First will be on their arse.
Virgin are the only ones that can do it right :/
Never thought I’d be gutted over news like this, but Virgin Trains are pretty much the only provider I don’t dislike! Better trains, better service. Never had an issue with them, and the iOS ticket app was brilliant. No waiting for the tickets in the post or the dash to the ticket machines to pick them up when running late.
Bransons concerns, despite having a tinge of sour grapes, seem logical & legitimate. The drop in First Group shares suggests that others agree…
so what can we see coming from this. i really hope that first buy the virgin pendolino trains as they are wonderful engines and some of the best trains in the uk unfortunately. unlike the slower and half as nice trains that run long distance on the first great western line. virgin dont run a bad service rly. a lot of the delays are national rails failure to maintain trackbed and overhead wires on the line and i doubt first will contribute much to fixing this. while the overhead cables are old stretched and sagging the speeds have been reduced so first cant really run a much better service.
Caption Contest for lead picture?
Apologies in advance…
-Branson: “I’ve had all these”
- Branson: “can I park my big red training your tunnel”
- Girl 1: “use some f*cking deodorant quim chin”
I am NO FAN of Virgin (I can’t think of a service of there’s I’ve ever used that I’d ever recommend) but it does seem that this new contract is doomed to fail. Really looks like economic nonsense. Thusly I’m not surprised he is so furious about it.
Good Lord I said “there’s”. Before anyone picks me up on it, it is Sunday evening, it has been a gorgeous day, and I’ve been inside studying tax since 8am.