Yahoo Finance Virgin Trains Gets West Coast Line Extension
Virgin Trains will continue to run the West Coast Main Line for the next 23 months in the wake of the botched bidding process for the contract.
The move was revealed as a report into the collapse of the West Coast Mainline deal blamed the Department of Transport (Euronext: IXSTP.NX - news) for "unacceptable flaws" in how the bidding was handled.
An inquiry was launched after an embarrassing U-turn by the Department for Transport (DfT), which admitted it got its sums wrong after initially handing the franchise to Virgin's rival FirstGroup (Other OTC: FGROF.PK - news) .
Virgin founder Sir Richard Branson, who had described the bidding process as "insane" and mounted a legal challenge to the decision, was delighted by the decision.
He said: "It has been a long journey to get to this point but we won't be resting on our laurels and intend to keep improving services for our loyal customers.
"Our lawyers said we had a less than 10% chance of winning after the Government originally awarded the franchise to FirstGroup. One of the key things we have learned from this episode is to never give up if you think right is on your side.
"This is a perfect early Christmas present for our wonderful Virgin Trains staff and customers. Onwards and upwards in 2013 and beyond."
A FirstGroup spokesman said: "It is especially disappointing that passengers and taxpayers will not see the benefits that our successful bid would have delivered."
Transport Secretary Patrick McLoughlin said: "We are determined to ensure not only that passengers continue to experience the same levels of service they have in the past, but that services improve.
"There will be a new hourly service linking Glasgow and London and we will also work with Virgin Trains to explore other service improvements."
Virgin said there will be up to 28,000 more seats each day on the line because of the delivery of 106 new Pendolino carriages.
Its (Euronext: ALITS.NX - news) temporary deal will run from December 9 until November (Xetra: A0Z24E - news) 9 2014, after which the West Coast line will be let under a long-term franchise.
DfT will be able to cut the 23-month period short "by up to six months if a subsequent franchise can be let on a shorter timescale", the Government added.
Three DfT officials were suspended after the bidding process was scrapped and Virgin was expected to be given the go-ahead to run the line for between nine and 13 months.
Those suspensions have now been lifted, the department said.
The new deal will see Virgin run the line on a temporary basis for far longer but does not involve an interim franchise as all existing bid processes were suspended pending the findings of an independent inquiry into the franchise system ordered by Mr McLoughlin.
The investigation, led by Centrica (Xetra: A0DK6K - news) chief executive Sam Laidlaw, produced damning initial findings which listed a string of failings by the DfT.
He said the report revealed "a lack of transparency, inadequate planning and preparation, as well as a complex and confusing organisational structure with weak quality assurance and insufficient governance oversight".
The report found:
:: The DfT used flawed methodology to guide bidders on the amount of risk capital they would need to guarantee the franchise against default
:: Those figures were then varied in a way that contravened franchise competition rules
:: Ministers made the provisional contract award on August 14 without being told of the critical flaws and after being given "inaccurate reports"
But it found there was no evidence of a bias against Virgin during the franchise process.
Mr Laidlaw added that if his recommendations are acted on quickly, they "will help to restore confidence in the DfT's ability to conduct effective rail franchising and procurement".
The full report was published on Thursday, which Mr McLoughlin said made "extremely uncomfortable reading" for the department.
"I do not hide from the seriousness of its findings," he added.
Sir Richard Branson, speaking to Jeff Randall on Sky News, said: "At the time, without having much information, on the back of an envelope we did some calculations and it looked like something was horribly wrong.
"We will be giving any monies we make over the next 20 months, whatever it is, to good causes and to charities."
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