History repeats itself as the current East Coast operator admits it will not meet its franchise commitments over the full eight year contract, and so will be replaced by an integrated ‘track and trains’ partnership.
THE eight-year Virgin Trains East Coast franchise is to finish three years early in 2020 following lower than expected growth in revenue and passenger numbers. It will be replaced by an integrated ‘track and trains’ joint venture between Network Rail and a new operating entity.
It had become clear that the financial performance of VTEC, which is 90% owned by Stagecoach and 10% by Virgin, was falling far short of the predictions it made to enable the promised premium payments.
For the eight-year agreement between 2015 and 2023, the franchise contract included a commitment to pay £3.3 billion to the Department for Transport. This was based on a 50% increase in passenger numbers over the period, and revenue growth of close to 10% per annum. The belief was that a combination of stronger marketing using the Virgin name and enhanced services following the introduction of Class 800 and Class 801 IETs would result in significant traffic growth.
The reality has been a much lower increase in passenger numbers, which has made the premium payments in later years unsustainable.
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