Virgin Trains has launched legal action against the Government over the Department for Transport’s decision to ban it from bidding for rail franchises.
The company, along with partners Stagecoach and French rail business SNCF, has lodged a claim against the Department for Transport (DfT) with the High Court over the bidding process for the West Coast mainline franchise.
Patrick McCall, senior partner at Virgin Group, which owns 51% of Virgin Trains, said the DfT is “focused on which bidder is reckless enough to take on various unquantifiable risks, such as pensions”.
He added: “It is extremely frustrating that the reason our bid was disqualified has nothing to do with looking after passengers or running a good train service.”
Bosses were told by officials that they could not submit a bid unless they were willing to take on potentially huge pensions liabilities, which is unviable, the company claims. Earlier this month a similar claim was lodged over Stagecoach’s ban to bid for the East Midlands rail franchise. The business is also banned from bidding for the South Eastern franchise.
This comes just weeks after Virgin Group founder Sir Richard Branson expressed shock at the disqualification from bidding, and has admitted the bold Virgin name, which has been on the side of trains for 22 years, could disappear.
Stagecoach chief executive Martin Griffiths said: “We believe the rail system should be about appointing the best operator for customers, not about passing unquantifiable, unmanageable and inappropriate risk to train companies.
“It is disappointing that we have had to resort to court action to find out the truth around the DfT’s decision-making process in each of these competitions. However, we hope court scrutiny will shine a light on the franchising process and help restore both public and investor confidence in the country’s rail system.”
The claim has been brought by West Coast Trains Partnership Limited, in which Stagecoach has a 50% share, with SNCF holding 30% and Virgin 20%.
Guillaume Pepy, SNCF executive chairman, said he was “disappointed” and added: “We strongly believe rail franchises should be let on a sustainable basis to those operators who offer the best services, the best trains, and the best customer experience in a cost-efficient manner.”
Earlier this month, Stagecoach said the DfT was forcing bidders to take on pension liabilities that could be in excess of £1 billion. The firm said it refuses to accept the potential pension risks that the department requires operators to bear.
The DfT said: “Stagecoach is an experienced bidder who knowingly submitted non-compliant bids on all competitions. In doing so, they disqualified themselves.
“We do not comment on legal proceedings. However, we have total confidence in our franchise competition process and will robustly defend decisions that were taken fairly following a thorough and impartial evaluation process.”
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