A PARTNERSHIP of Stagecoach and Virgin Trains has been awarded the East Coast franchise, after almost a year of consideration by the Department for Transport.
The winners have beaten two other bidders -- FirstGroup and a consortium of Keolis and Eurostar. Stagecoach and Virgin have welcomed the news, while FirstGroup said if it had been selected it would have created a "world class railway".
But the RMT has condemned the decision as 'an act of utter betrayal: a national disgrace', while it has been revealed that Labour tried to have the award process suspended.
The new franchise will start in March 2015 and is planned to run until 31 March 2023, with the option for a one-year extension at the DfT’s discretion. It includes a commitment to pay £2.3 billion in real terms in premiums.
The eight year contract includes 23 new services from London to major destinations, with 75 more station calls a day, accompanied by plans for new direct links to Huddersfield, Sunderland, Middlesbrough, Dewsbury and Thornaby. There are also proposals for more trains to London from Bradford, Edinburgh, Harrogate, Leeds, Lincoln, Newcastle, Shipley, Stirling, and York.
The Department for Transport said there would be 3,100 extra seats for the morning peak by 2020 and a total of 12,200 extra seats during each day, doubling present capacity.
Hitachi-built Intercity Express trains will come into service during this franchise, consisting of 500 vehicles.
Journey times will be cut between London and Leeds by 14 minutes and London and Edinburgh by 13 minutes.
The franchisee has undertaken to invest £140 million in trains and stations.
Transport secretary Patrick McLoughlin said: "This is a great deal for passengers and for staff on this vital route. It gives passengers more seats, more services and new trains. We are putting passengers at the heart of the service. I believe Stagecoach and Virgin will not only deliver for customers but also for the British taxpayer.
"This government knows the importance of our railways. That is why they are a vital part of our long term economic plan, with over £38 billion being spent on the network over the next five years.
"We looked at the whole of the bid, and this was the best of the three. It is estimated that the franchise will yield £3.3 billion in premiums during its eight years. That was one reason for awarding the contract to Stagecoach and Virgin, but not the only one. There are to be major improvements for passengers too."
Mr McLoughlin's premiums figure appeared to be quoted in actual cash rather than real terms value, which will be about £1 billion less.
The winning consortium is led by Stagecoach, with Virgin Trains taking a minority share of 10 per cent.
Stagecoach Group chief executive Martin Griffiths added: "A passion for customers, employees and the community is at the heart of our plans for the franchise. We want to build on the quality and pride of the people who will be joining our team.
"We have some fantastic ideas to deliver a more personal travel experience for customers. Investing in the committed people who will make that happen is a big part of our plans, giving opportunities for them to develop and grow into more senior roles. At the same time, we have developed major programmes to help young people, communities and small businesses along what is one of Britain’s major rail routes."
Virgin Group senior partner Patrick McCall also welcomed the decision, saying: “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.”
FirstGroup chief executive Tim O’Toole has reacted to his company's third franchise defeat this year, having already lost both ScotRail and First Capital Connect. He said: “Our bid for the East Coast franchise was ambitious yet realistic. Had it been selected, it would have created a world class railway for passengers and value for taxpayers with a balanced level of risk and returns for shareholders.
“As one of the UK's most experienced operators, we remain committed to the rail market but we are dissatisfied not to have secured any of the franchises that have come up for tender in this first round.
“Whilst we will retain a disciplined approach to bidding, we will continue to examine and assess the feedback from this and previous rail bids to help shape our approach to future competitions.
“We are shortlisted to run the next TransPennine Express franchise, and are negotiating with the DfT to extend our current operation of that route to February 2016. We are also negotiating with the DfT for a direct award to operate First Great Western, our largest franchise, through to at least March 2019.
“There are 12 franchise competitions still to take place and we remain focused on reaching our desired position in rail by the end of the process, which is to achieve earnings on a par with the previous franchising cycle at an acceptable level of risk and return.”
The award has been made in the face of determined opposition from rail unions and some transport campaigners, who wanted the Intercity East Coast operation to stay in public hands. RMT general secretary Mick Cash said: "The government has confirmed that it is bulldozing ahead with the re-privatisation of the East Coast Main Line despite all the figures showing that the current public sector operator is handing over a billion pounds back to the British people while delivering huge improvements in service and customer satisfaction."
Shadow transport secretary Michael Dugher revealed that he had written to the Department for Transport's permanent secretary Philip Rutnam asking him to postpone the process. Mr Dugher said: "The taxpayer and the travelling public have been sold down the river. This whole franchise process shouldn't have happened.
"Rather than rigging the franchise timetable in order to sell it off before the election, David Cameron's government should have been putting the public interest first and working to get a better deal for passengers."
The last private sector operator on the route was National Express Group, which surrendered the franchise in 2009 because revenue fell short. Since then it has been run by Directly Operated Railways, a subsidiary of the Department for Transport.