Why there will be no more Virgin Trains

The Man Who Pays His Way: For Mr Richard Branson, as he was in 1997, launching Virgin Trains was a huge risk

If you start a ferry firm with no ships, name it Seaborne Freight and cut and paste the legal terms from a pizza takeaway, the Department for Transport (DfT) will award you a contract to connect Kent with Belgium in the event of a no-deal Brexit.

But if you run a train company that has been connecting Scotland, northwest England, the West Midlands and London successfully for 22 years, the DfT may abruptly dispense with your services.

Virgin Trains and its partner Stagecoach have been excluded from bidding to continue to run trains on the West Coast main line beyond 2020 because, says the DfT: “They submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.”

The “current competitions” involved agreeing with some liability for staff pensions.

The incumbent train operator was happy to pay all the pension contributions for its current workforce, but felt that responsibility for the pensions deficit across the rail industry was a risk too far in what is an uncertain business.

For Mr Richard Branson, as he was in 1997, launching Virgin Trains was a huge risk.

When he was awarded the West Coast main line franchise at the start of that year, John Major’s Conservative government was imploding, riven with dissent over Europe (plus ça change…).

Less than eight weeks after the first Virgin Trains departed from London Euston to Birmingham, Manchester and Glasgow, the Tories would be decimated in Tony Blair’s Labour landslide.

Many voters were angry by what they saw as a privatisation too far: the breaking up of British Rail, selling off the railway network, trains and rolling stock to profit-making companies. It was quite unlike the launch of Virgin Atlantic in 1984, when travellers were delighted to see a challenger take on British Airways and the other transatlantic airlines.

From the start, Virgin Trains and every other operator was reliant upon Railtrack, the privatised infrastructure provider that was so hopeless that it was renationalised.

Virgin Trains proved capable of its own occasional shambles – such as an absent driver delaying delegates on their way to the 1998 Labour Party conference in Blackpool, after which Mr Branson swore he was sorry. Literally, on BBC Radio 5 Live: “We f***ed up, we f***ed up badly on that day,” he told listeners to the Breakfast programme.

The Virgin boss also faced derision from within the rail industry when, in 2002, he vowed to double annual passenger numbers, then 15 million. In fact, the train operator did far better, with 40 million journeys and rising.

This remarkable achievement was built on the principle of inspiring staff to deliver excellent service, along with the help of billions of pounds of public money spent improving the West Coast main line.

Between London and Manchester, the number of trains has trebled, with flights between the two cities falling by the same proportion as journeys became faster and more reliable.

Sir Richard, as he became in 1999, has been on the wrong side of franchising decisions before. In 2012, the DfT appointed First West Coast as the new operator after it bid more than £1m per day for the right to run the railway.

The-then rail minister, Theresa Villiers, said of the deal: “We believe that the bid is deliverable and robust.” But Virgin Trains simply didn’t believe the figures added up and began legal action. The DfT then discovered it had made “deeply regrettable and completely unacceptable mistakes” in its calculation, and Virgin kept the franchise.

Virgin and the Stagecoach Group got their sums wrong in 2015 when they took on the East Coast main line franchise on forecasts that turned out to be wildly optimistic. After three years in which they lost more than £200m, the DfT took control from Virgin Trains East Coast.

That experience made the Virgin-Stagecoach combination wary of committing too much for the renewal of the West Coast franchise. In particular, they were not prepared to commit to uncertain pension liabilities.

Unless Sir Richard can pull another rail rabbit out of the High Court hat, Virgin Trains may reach the end of the line as early as November this year.

But on the other side of the Atlantic, the name lives on. Brightline, which has created a new network from Miami via Fort Lauderdale to West Palm Beach and, ultimately, Orlando, has taken the Virgin Trains brand.

Meanwhile, what Sir Richard said in 2012 remains true: “Under our stewardship, the West Coast main line 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.”

The DfT insists: “It is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”

But I sense that Chris Grayling’s department may have taken a risk by despatching Virgin Trains to the sidings so abruptly.