August 27, 2012

Branson makes final appeal to retain West Coast franchise

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SIR Richard Branson, founder of Virgin Group, has made a final appeal against the recent decision by Britain's Department for Transport (DfT) to award the 13-year four-month franchise for InterCity West Coast to First Group rather than accept a bid from the incumbent Virgin/Stagecoach joint venture which he claims is less risky.

Virgin/Stagecoach offered a premium of £4.8bn over the lifetime of the new franchise, compared with the  £5.5bn (net present value) offered by First Group, starting at £26m in the year ending March 2014 and rising to £739m in the year ending March 2026.

Branson has asked Britain prime minister, Mr David Cameron, to delay the signing of the contract with First Group, which is expected tomorrow, to allow time for the deal to be examined independently. Branson says Virgin has put about 40 questions to the DfT regarding the award of the franchise and the decision-making process but has not had a single answer. He fears a repeat of the East Coast Main Line franchise, where unrealistic bids were accepted by the DfT on two occasions, both of which ended in failure. The East Coast franchise is currently being run by the DfT's in-house operator until a new franchise can be let.

Virgin/Stagecoach has offered to run the West Coast franchise, which it has held for the last 15 years, on a not-for-profit basis while a review is conducted. An online petition in favour of Virgin/Stagecoach retaining the franchise has been signed by more than 100,000 people.

First Group CEO Mr Tim O'Toole has dismissed Branson's appeal and says that First Group, which currently holds four British franchises, is confident it can meet its growth targets needed to pay the premium it offered in its bid.

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