Virgin Trains loses contract for UK train services

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Virgin Trains Pendolino train on the West Coast route in Oxenholme in northern England in July 2018.
Keith Fender
LONDON — Virgin Trains has been replaced as operator of the West Coast network from London to Glasgow, Scotland, that Virgin had operated since it was originally privatized in 1997.

Virgin sold 49% of its United Kingdom rail company, Virgin Trains, to U.K.-based Stagecoach in 1998. The two companies have cooperated ever since on the route. Their bid to operate the route had been rejected by the U.K. government in April following a dispute over long-term retirement savings costs. Virgin and Stagecoach have started legal action against the government over this disqualification, which is ongoing.

The new operator for the new West Coast Partnership contract is U.K.-based private sector transport group First Group together with partner Italian state owned national railway operator Trenitalia. First Group owns 70% of the new First Trenitalia operating company. It also owns Greyhound bus lines in the U.S. and operates several U.K. rail contracts, including Great Western Railway.

The new 12-year contract to operate the West Coast route will start in December, with the new operator taking on some commercial risk until 2026.

New high-speed line too
From March 2026 the contract will include operation of the first stage of the new High Speed 2, 225-mph high speed line, now being built, connecting London with central England. With HS2 operation added the contract switches to a management contract with a fee based upon costs and revenues for five years to 2031. While the high speed line is being built the new U.K. government has announced it plans to review support for the project during the next several months.

New trains

As is usual with U.K. franchise contract changes the existing equipment (and staff) will transfer to the new operator. Despite the bold Virgin branding on the train fleet, none of it was ever owned by Virgin but by private sector leasing companies. The new contract will see all the 125-mph DMUs in the fleet replaced by new 13 electric/diesel bi-mode trains plus 10 new 125-mph EMUs by December 2022. The 56 tilting 125-mph Alstom-built Pendolino EMUs that operate most services will remain in use with new interiors installed.

In total, private equipment leasing companies will invest more than $500 million in new and upgraded trains.

Virgin Rail to retaliate?
While disqualified from the government awarded contract, Virgin Trains has submitted plans for open-access services connecting London and Liverpool, England, a route which currently only has one train each hour. The company is waiting to find out if these plans will be agreed to by the U.K.’s independent rail regulation office — but in a twist — the new First Trenitalia operation also plans an extra train between London and Liverpool. It is unlikely both operators will be given train access for the route.
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