British billionaire Richard Branson’s Virgin Trains has been outbid by rival transport firm FirstGroup for the right to run trains on the UK’s most profitable route between London and Scotland.
Branson called the decision “insanity” and said FirstGroup will have to put up fares and cut services to cover its more than seven billion euro bid. He said FirstGroup’s financial projections were overly ambitious.
The flamboyant serial entrepreneur added that for Virgin “to have bid more would have involved dramatic cuts to customer quality and considerable fare rises which we were unwilling to entertain.”
Virgin has had the franchise, with its partner Stagecoach, since rail privatisation in 1997. During that time it became the frequent butt of jokes for poor punctuality, though the company blamed infrastructure problems on the line.
FirstGroup confident of growth
FirstGroup said it will add capacity on the line which passes through some of Britain’s largest and growing major urban areas, including London, the West Midlands, Greater Manchester, Liverpool and Glasgow.
FirstGroup is due to start operating the new franchise on December 9 and expects the route, which has annual revenue of around 900 million pounds (1.15 billion euros), to generate sales growth of 10.4 percent and profit margins of roughly five percent over the 13 year life of the contract.
The shortlist for the franchise had included two foreign, state-backed groups – Keolis of France and Holland’s Abellio – as well as the incumbent Virgin Trains.