Stagecoach and Virgin win InterCity East Coast rail franchise

Stagecoach Group plc. and Virgin Group Ltd. are to be awarded the InterCity East Coast rail franchise, the UK Department forTransport announced on Thursday. Shares in Stagecoach were 8% up on the news.

The consortium, in which stagecoach has a 90% stake, is to pay the UK government approximately £3.3 billion for the contract.

The award is a serious setback for contender FirstGroup, whose UK rail business has contracted after it lost contracts to carry on running the Thameslink and ScotRail networks, and failed in its bid for the Essex Thameside franchise.

Stagecoach said in a statement on Thursday that passengers can look forward to more frequent and faster journeys while the taxpayer will benefit from considerable increases in premium payments to the Government during the eight-year life of the franchise.

The new franchise starts in March 2015 and expires in March 2023, with an option of a 1-year extension at the discretion of the Department for Transport.

Stagecoach-Virgin joint venture

Pairing up with Virgin Trains was a wise move for Stagecoach.

Stagecoach CEO, Martin Griffiths, said:

“Passengers using the East Coast mainline will benefit from hundreds of millions of pounds of infrastructure investment and service improvements over the next decade. Together with Virgin, our innovative plans will give customers new services, faster and more frequent trains, and easier, more personalised journeys.”

Senior Partner at Virgin Group, Patrick McCall, said:

“We’re delighted to have been chosen to run the East Coast franchise. Our long term partnership with Stagecoach has seen a revolution in customer service standards, great product innovation, reduced journey times and improved timetables on the West Coast mainline. We plan to deliver similar success on the East Coast and are looking forward to working with the team there to build on their achievements.”

“Our partnership will concentrate on areas for which Virgin is famous, such as looking after our customers and our people. We have a great opportunity to blend the successes of the East Coast and the West Coast lines to create a great experience for all. Together with these new ideas and initiatives, passengers will begin to see those Virgin touches on each and every journey.”

The InterCity East Coast franchise includes the London-Edinburgh route, which was nationalized in 2009 after National Express, the operator at the time, handed it back after clocking up massive losses.

Returning the franchise to the private sector has been criticized by transport unions and the Labour party.