UK - Virgin declares price war

[John Ashworth]

Virgin declares price war on rival train operator that restored routes

From The Times
April 7, 2009
Ben Webster, Transport Correspondent

The train company that offers Britain’s cheapest rail tickets is engaged in a battle with Virgin that threatens to force it out of business.

Wrexham & Shropshire, which runs trains between North Wales, the West Midlands and London, began operating a year ago after spotting a gap in the market for direct services.

Despite receiving no subsidy it charges £53 for a standard class any-time return ticket from Wrexham to London. A similar ticket bought from Virgin costs £201.

Now Virgin plans to run trains in direct competition with W&S, despite having previously shown no interest in providing services to the key stations served by W&S.

Virgin, which receives £35 million a year in public subsidy, won the West Coast franchise 12 years ago. It withdrew its direct service to Shrewsbury in 2004, claiming that there was insufficient demand. Now, having observed the success of W&S, Virgin is planning to run trains from London to Shrewsbury and Wrexham.

It intends to apply to the Rail Regulator for permission to operate services that, in some cases, would depart within 45 minutes of a W&S train.

The rail industry is watching closely to see whether the regulator will step in to protect W&S from its larger rival. If it does, more small companies are likely to take on the regional monopolies enjoyed by the big companies.

W&S said that it would be likely to close down if it faced direct competition from Virgin. It believes that Virgin would attract a significant proportion of its passengers by offering cheap “advance” fares restricted to a single train. W&S only just covers its costs because it cannot pick up passengers at Wolverhampton and Birming-ham International, where Virgin has exclusive rights under its franchise.

W&S is the only long-distance company to offer cheap flat fares on all its services. It is also the only company that allows passengers to pay on board at the same price. Virgin’s cheap fares are available only if tickets are booked up to 12 weeks in advance for specific trains. Sir Richard Branson’s company forces passengers who pay on board to buy the most expensive peak ticket, even if they are travelling off-peak.

Owen Paterson, the Conservative MP for Shropshire North, has asked the Rail Regulator to investigate what he believes is an attempt by Virgin to force a smaller operator out of business. He wrote: “We are very concerned that if Virgin succeeds in using the market dominance entrenched by its franchise to force out the competition, it will then withdraw the direct connections; our constituents will again be forced to use indirect Virgin services without any alternative.”

A Virgin spokesman denied that it was trying to force W&S out of business. He said that the Virgin trains, due to start in December, would complement those of W&S. “We think it provides greater choice throughout the day for the people of Shropshire,” he said.