Stagecoach and Virgin awarded West Coast extension despite East Coast failure

  • Stagecoach and Virgin awarded West Coast extension despite East Coast failure

Stagecoach and Virgin awarded West Coast extension despite East Coast failure

Grayling enraged opposition MPs on Monday by also announcing that Virgin and Stagecoach had been awarded an extension to their operation of the West Coast mainline service between London and Glasgow, despite being forced to pull out from the East Coast service as a result of their mismanagement.

He said: "The problem is that Stagecoach got its numbers wrong".

Grayling says that the franchise has met all of its financial commitments since it began operating 2015, returning almost £1bn to the exchequer, albeit at a cost of almost £200m to Stagecoach. From 2020, there will be a new long-term plan for the route in place, he added.

Grayling said that despite making significant losses of nearly £200 million, Stagecoach has met all of its financial commitments to the taxpayer, believed to be nearly £1 billion, and that there are no legal grounds from barring it from future bids.

Virgin and Stagecoach took over in March 2015, initially on an 8 year deal, but their tenure could end up being just 3 years.

In November, the Department for Transport said Stagecoach and Virgin would withdraw from running the service three years early, in 2020, after running into difficulties.

Since then, the DfT has conducted detailed analysis and has notified the franchise that it has breached a key financial covenant.

"One option is that the franchise would be directly operated by the Department for Transport". He insisted Stagecoach would suffer a £200million loss - and that he would be "gobsmacked" if any of their directors had received a bonus.

And Stagecoach is in the running to win the East Midlands contract.

Shadow transport Andy McDonald said: "The announcement today is yet another monumental misjudgment to add to a growing list of miscalculations by this Secretary of State".

The East Coast Mainline franchise was previously taken into public ownership in 2009 after being run by National Express PLC (LON:NEX).

He said he has not made a decision on a successor, and could either let Stagecoach continue "under a very strictly designed short term arrangement" or Government will step in on a "short-term, not-for-profit" basis as a last resort.

"He does not care about passengers, or the industry itself, but will do everything in his power to protect the failed franchise system".

But in a statement tonight Stagecoach chief exec Martin Griffiths claimed the Government had "rigorously tested" its bid at the time, adding: "I was personally told at the time it was the highest quality bid they had ever seen".

He told the House of Commons Stagecoach was set to lose about £200m, equating to more than 20% of its total market value.

He blamed a "weak economy and political uncertainty" as well as track issues.