The Department for Transport (DfT) handed the contract to FirstGroup after Virgin’s rival is thought to have made what industry insiders describe as a “suicide” offer of £6.5bn to £7bn to run the line. Virgin, its closest competitor for the franchise, bid £5.5bn to £6bn.
In his blog, Sir Richard voiced fears that the amount FirstGroup paid will make the contract unprofitable, forcing the Government to take back ownership of the line. This is what happened with the East Coast Main line, when first GNER (in 2007) and then National Express (in 2009) were stripped of the contract after they could not afford to pay the Government £1.3bn for the right to run the service.
“[Our] achievements have counted for little – as this is the fourth time that we have been outbid in a rail tender,” Sir Richard wrote. “On the past three occasions, the winning operator has come nowhere close to delivering their promised plans and revenue, and has let the public and country down dramatically.
“In the case of the East Coast Main line, both winners – GNER and National Express – over-promised in order to win the franchise and spectacularly ran into financial difficulties in trying to deliver their plans. The East Coast is still in Government ownership and its service is outdated and underinvested, costing passengers and the country dearly as a result.