Branson Calls Rail Rival's Bid 'Preposterous'

Virgin boss Sir Richard Branson has told the House of Commons Treasury select committee that the winning bid by First Group to run The West Coast was “preposterous”.

At least one MP accused him of sour grapes, while First Group's CEO Tim O'Toole claimed that Sir Richard was wrong in his assumptions because he hadn't seen First Group’s winning bid and doesn't know what was in it.

Since losing the franchise last month, Virgin has mounted a legal challenge, claiming the Department for Transport (Euronext: IXSTP.NX - news) did not follow its own rules on risk assessment and deliverability.

Sir Richard told MPs (BSE: MPSLTD.BO - news) that Virgin had lost rail franchises three times before, once for the Cross Country franchise and twice to run the East Coast line.

In 2009, the East Coast mainline from London to Glasgow was temporarily nationalised when GNER and then National Express failed to run it profitably.

Sir Richard said the time had come to “draw a line in the sand” and challenge the decision in the courts.

He claimed that had Virgin won the East Coast franchise, the trains and services would be better and the East Coast would be used by ten million more passengers a year.

Sir Richard said: "This bid by FirstGroup (Other OTC: FGROF.PK - news) is absolutely preposterous. It's completely ridiculous. It is literally taking the system for a ride."

He added that Virgin had asked the Transport department many questions about the decision to strip Virgin of the franchise, but replies "have not been forthcoming".

Conservative MP Kwasi Kwarteng said some people felt Sir Richard was taking the decision badly, and that in taking legal action Virgin is "bringing in the heavy artillery", with Branson himself "using your prestige and fame" to force the government to change the decision.

Sir Richard replied that across various modes of transport he had "created a number of ventures with the principle aim of making a real difference to those sectors".

He went on: "The profit motive is not important to me. I am lucky enough to be able to afford breakfast, lunch and dinner every day for the rest of my life." But he said the decision was bad for passengers and bad for the country.

The Virgin legal challenge has forced the government to delay the signing of the new West Coast franchise which had been due to start in December.

After Sir Richard gave evidence, it was the turn of First Group's CEO Tim O'Toole, who challenged Virgin's version of events, saying that Sir Richard and his executives were wrong about First Group's bid because they had never seen it.

The allegation that the First Group model "was back loaded", ie would only return substantial profits to the government in the last three years of the franchise, was incorrect, and the Department for Transport had thoroughly assessed risk and deliverability and had awarded the franchise to his company as a result.

He cited First Group's success in running the Trans-Pennine line, which had seen “fantastic growth” which he hoped to replicate on the West Coast line.

Sir Tim said his proposals included a new class of travel, below First Class but offering enhanced services compared to Standard Class.

He said he expected fares to rise in line with inflation, and that staffing levels would remain the same, at least for the first five years.

Asked if First Group might fail as the operators of the East Coast line had failed, Mr O'Toole replied: "I don't think there is any chance of our handing back the keys."