Virgin Challenges First Group on West Coast Bid Promises

LONDON, August 30, 2012 /PRNewswire/ --

Virgin Rail Group (VRG) today challenged FirstGroup(FG) CEO Tim O'Toole to 'come clean' on his company's commitments for the West Coast Main Line franchise after a series of contradictory and unclear statements made to City analysts and MPs.

In a 10-question challenge, published below, the company asked for clear evidence of FG's franchise commitments if it takes over the West Coast Main Line in December.

In particular Virgin pressed for confirmation that FG would match Virgin's bid commitment of almost £800m investment, including station investment of almost £100m. It also demanded clear statements on whether FG will retain the entire existing fleet and whether it had yet signed key contracts with train providers, as Virgin has.

It also questioned Mr O'Toole's claim that GDP would average 2.5% over the next 10 years, when Treasury forecasts much lower figures in the early years of the franchise.

Tony Collins, VRG CEO, said: "So far we have had an interesting wish-list from FG but no firm commitments and our customers and MPs would expect to know more about these before any contract is signed by the Government. In any event, our firm commitments are more extensive than FG's wish-list. It is time for Mr O'Toole to come clean and reveal the true commitments.

"Taking all this into account, we find it impossible to believe that the FG's bid can deliver more improvements for customers, which is why the Government scored it as less deliverable than the Virgin bid," said Mr Collins.

Normally under franchise process, the successful bidder sets out a range of 'franchise obligations' - legally binding commitments - but none has been published by FG or the Department for Transport. Those that have been published are less beneficial to customers than Virgin's, which are published below.

• New Services - our bid also proposes new direct services to Telford/Shrewsbury/Blackpool/Bolton but they would start a year earlier than FG. We would also double the frequency to Preston and increase calls to North Wales/Nuneaton/Milton Keynes and speed up journey times between Euston and Glasgow. In addition we would create new services to Stirling, Motherwell, Hartford, Liverpool South Parkway, and further enhance services for Gobowen/Chirk/Ruabon/Wrexham, increase journey opportunities between Milton Keynes/Rugby/Stafford to the North West and increase calls at Tamworth/Lichfield.
• Trains - we would replace all of the Voyager trains with 21 6-car "Baby Pendolinos" which would mean no diesel operation over electrified lines, delivering the best environmental solution and an all Pendolino fleet providing the best passenger environment. FG appears to be retaining all of the Voyager fleet but it is not clear whether this is a firm commitment to do so or that they have the option to redeploy them to other routes. Assuming they do retain all of the Voyagers, FG would be providing 4% more seats than we would on a daily basis. The investment in fleet would be £385m, but no contract is in place for FG.
• On Board Service - we would replace the current WIFI system with a completely new state of the art system capable of growing with passenger needs, as enhancing the current system is not feasible. There would be a complete On Board refresh. All of this would support the enhanced at seat complimentary service in First Class and a new at seat service for Standard Class. The Virgin investment in the On Board service is £109m, but there are no details as yet from FG.
• Track - to deliver the improved journey times working with Network Rail we would undertake a number of infrastructure upgrades including enhancement to allow the Pendolino to reach a top speed of 135mph in order to improve a number of journey times. This Virgin investment would be £125m, but there is no firm commitment in FG statements.
• Stations - As with FG we would install ticket gates and undertake a number of station improvement projects. We would also create more car parking, install more ticket machines and introduce smart cards. CCTV and information points would also be installed. The investment for stations totals £99m. FG has said they will invest £22m in this area.
• Passenger Services - we will design and develop a revolutionary new Centralised Booking Engine (CBE) which is unique to the industry. It pulls together all of the many industry systems and provides the passenger with a one stop shop experience. As part of this we will introduce a new customer experience system which includes a loyalty scheme in partnership with a major scheme provider. The investment in this area is £39m, but there is no detail in this area from FirstGroup

Including a number of other projects not listed above we are planning to invest nearly £800m in the franchise. FG has said its investment package is worth £350m but there is little detail of how or whether this is to be spent. To help customers and MPs understand, VRG has put 10 questions to Mr O'Toole, based on his recent comments to analysts and MPs.

• You say you 'seek to introduce' new services to Shrewsbury, Blackpool and Bolton. Are they guaranteed?
• Will there be any compulsory redundancies?
• Is the £350m investment guaranteed, or conditional on customer numbers?
• Why do you believe GDP of 2.5% a year is realistic, when Treasury forecasts are lower?
• Are journey time improvements London-Glasgow and additional services to Preston guaranteed?
• Will FG match the £99m investment committed to by Virgin Trains at stations, including £20m on better car parking?
• Is Mr O'Toole aware of the major impact on revenue that major Network Rail work will have in the next five years, and the fact that Sir David Higgins, Network Rail's CEO, says "Its glaringly obvious to me now......that signalling is a major issue"  In contrast Mr O'Toole says "This is also the one franchise where it is easier to make that commitment because it does not face the delivery risk present in almost every other franchise, because of the need elsewhere to accommodate extensive renewal and enhancement work. This investment is already in place. The railway is whole
• Will FirstGroup confirm that the 12,000 additional seats are guaranteed and will be above the number available at the time the franchise begins, and that contracts are in place with train maintenance companies to ensure all existing trains are used throughout the franchise?
• The DfT said that FG will be measured against National Passenger Survey scores. How will this be measured, and will measurement be against improvements of Virgin's existing scores of 91% overall satisfaction?
• Will FG match or exceed the firm commitments offered by Virgin Rail Group in its bid, as above?