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Virgin Trains loses contract for West Coast rail line to FirstGroup

Virgin Trains has lost control of the prestigious West Coast rail line that it has run for 15 years after minister handed the contract to Firstgroup.

Telegraph
By Andrew Trotman, and Nathalie Thomas7:00AM BST 15 Aug 2012

The Department for Transport (DfT) handed the contract to Virgin's rival after FirstGroup 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.

Sir Richard Branson's Virgin Trains is now expected to push for a judicial review of the decision.

"The new franchise will offer substantial improvements in the quality and frequency of services which will attract far greater numbers of passengers, enabling InterCity West Coast to achieve a modal share comparable to other intercity franchises in the UK," FirstGroup said in a statement.

"This growth will create greater long-term opportunities for employees; generate solid returns for shareholders and justify the substantial Government investment of £9bn that this railway has received by providing better value for taxpayers."

FirstGroup also unveiled its plans for the network, which include:

• 11 new 125mph six-car electric trains for Birmingham to Scotland services
• a major refurbishment of Pendolino and Voyager trains, including quicker WiFi
• Improving journey times by 15 minutes for trains between London and Glasgow
• New direct services from London to Blackpool, Telford, Shrewsbury and Bolton
• Reducing Standard Anytime fares by 15pc, on average

Tim O'Toole, chief executive said: "With a strong focus on service quality we will continue to invest in frontline staff and look forward to welcoming new employees to the Group, providing them with long term opportunities from an enhanced and reinvigorated railway.

"Our bid also delivers value for taxpayers by returning premiums to the Government underpinned by sustainable growth in passenger numbers and revenues from the utilisation of significant available capacity. The new franchise will provide an economic return for our shareholders and is value enhancing from day one."

Virgin has been operating West Coast services between London and Scotland for 15 years through a joint venture with Stagecoach.

In a statement on Wednesday, Stagecoach said it was "disappointed" to lose the contract.

"We believe that Virgin Rail Group submitted a strong bid for the new franchise, which offered the prospects of continued, high quality services for passengers and a substantial yet deliverable benefit to taxpayers," the company said.

"Stagecoach and its joint venture partner, Virgin, were both committed to Virgin Rail Group winning the new franchise but only on terms that resulted in an acceptable risk-reward profile and which would add value to the partners' shareholders. We understand that Virgin Rail Group was the DfT second choice bidder and that the reason it failed to secure the new franchise was because another bidder contracted to pay significantly higher premium payments to the DfT."

Insiders say Virgin Trains now faces an uncertain future, with one senior source warning: "It could be farewell to Virgin Trains."

Virgin has spent almost £14m bidding for the West Coast contract and Sir Richard previously warned the Government that it risks repeating rail franchising mistakes of the past if it goes with FirstGroup's offer.

In a leaked letter to the Transport Secretary, Justine Greening, Sir Richard claimed the only way FirstGroup could meet its commitments would be to "drastically cut the quality of services". Industry experts say there is a high likelihood FirstGroup will have to "hand back the keys" to the franchise before the contract ends in 2026, a fate suffered by both GNER and National Express, which abandoned the East Coast Main Line when their bids proved unviable.

The judicial review would be the first legal challenge of its kind in the rail industry.

One senior industry source admitted it is a "long shot" but pointed out that Sir Richard has little other choice if he wants to remain in the rail business. "A judicial review is a difficult process but Sir Richard is passionate about rail," said the source. "He doesn't want to see a repeat of the National Express situation."

It is believed Virgin, which is headed by Tony Collins, has spent up to £60m bidding for rail contracts in recent years but West Coast is its only remaining franchise. It made several unsuccessful tilts at the East Coast Main Line and lost the Cross Country franchise to Arriva in 2007.

Virgin Trains would not comment but it is believed its bid team has not met DfT officials for more than a fortnight.
FirstGroup already has a registered company called First West Coast. Richard Parry, a former director at London Underground, has been leading FirstGroup's bid for the inter-city West Coast services.

Sceptics have pointed to FirstGroup's recent decision to hand back the First Great Western franchise three years early after the economic downturn rendered its £1.1bn contract uneconomic. By taking advantage of a break clause in the contract, FirstGroup avoided payments of almost £830m to the Government.

Virgin Rail Group, which is 51pc owned by Sir Richard and 49pc by Stagecoach, paid about £160m a year to run West Coast services. A £7bn bid would see FirstGroup having to meet payments averaging £500m a year. A spokeswoman for FirstGroup would not comment on the West Coast franchise but insisted: "We do have a track record of bidding responsibly."

Rail unions have warned FirstGroup it will face a major industrial battle amid fears cost-cutting could lead to the loss of up to 800 jobs. Bob Crow, general secretary of the RMT Union, has slammed the West Coast deal as an exercise in "casino franchising".

The DfT has come under pressure from the Chancellor to maximise proceeds from rail franchises.

Virgin Trains loses West Coast Mainline franchise

15 August 2012 Last updated at 07:15 GMT BBC

Virgin Rail has lost its bid to continue running the West Coast Mainline and will be replaced by the UK's largest rail operator, FirstGroup.

FirstGroup said it would "offer substantial improvements in the quality and frequency of services".

Sir Richard Branson said Virgin's loss of the franchise was "very disappointing news".

Unions and rail campaigners have argued jobs will be cut, fares will rise and catering services will be cut back.

FirstGroup already operates a number of rail routes including Great Western and ScotRail.

The company, under the name First West Coast Limited, will take over the franchise from 9 December and is due to to operate the service until 2026.

More seats

The West Coast Mainline route serves 31 million passengers travelling between London, the West Midlands, the North West, North Wales and the central belt of Scotland.

FirstGroup says it will introduce 11 new 125mph six-car electric trains on the Birmingham-to-Glasgow route and provide more direct services between destinations.

Additional Pendolino tilting trains currently being introduced by Virgin will deliver more than 28,000 seats a day.

The government says FirstGroup's new trains should add further 12,000 seats a day on West Coast routes from 2016.

FirstGroup's chief executive Tim O'Toole said it was a good deal for the company and the public.

"Our bid also delivers value for taxpayers by returning premiums to the government underpinned by sustainable growth in passenger numbers and revenues from the utilisation of significant available capacity," he said.

Higher payments

First West Coast says it will return £5.5bn at net present value to the government over the franchise term.

That is believed to have been much higher than the amount offered by Virgin Rail, which is 49%-owned by another transport company, Stagecoach.

In a statement, Stagecoach said the reason it had failed to secure the new franchise was because FirstGroup had contracted to pay "significantly higher premium payments" to the Department for Transport.

BBC transport correspondent Richard Westcott says the West Coast franchise is the first of several big rail franchises up for grabs over the next few years, and the government is under pressure to get a good deal.

But there are concerns that First Group may have bid too much for the franchise.

"There have been many examples… where there have been very aggressive bids which the government has awarded and then quite soon afterwards, the people have handed back the keys and walked away from the contract without any real penalty," said Stephen Glaister, Professor of Transport and Infrastructure at Imperial College London.

"That's a very unsatisfactory situation from a public interest point of view."

The trade unions have also warned FirstGroup that they will vigorously resist any attempts to reducing running costs by cutting pay or working conditions.

RMT general secretary Bob Crow said: "They should be left in no doubt that we will mount a massive industrial, political and public campaign to stop any attacks on our members' jobs and the services that they provide to the travelling public."

'Bitterly disappointed'

Sir Richard Branson's Virgin Rail has operated the West Coast franchise since 1997 after the privatisation of Britain's railways.

"We did not want to risk letting everybody down with almost certain bankruptcy at some time during the franchise, as happened to GNER and National Express who overbid on the East Coast mainline," said Sir Richard in a statement.

"Sadly the government has chosen to take that risk with FirstGroup and we only hope they will continue to drive dramatic improvements on this line for years to come without letting everybody down," he added.

Sir Brian Souter, the chief executive of Virgin's franchise partner Stagecoach, said: "I am bitterly disappointed that Virgin Rail has been unsuccessful in its bid.

"After 15 years, it is difficult to imagine a West Coast rail service without the Virgin brand."

He said the group would now look at whether to bid on other rail franchises coming up for renewal.

I am at a total loss to understand why First were given the franchise, except on financial grounds. The record for First Scotrail is appalling. Trains from Aberdeen to Glasgow/Edinburgh/Inverness are overcrowded, toilets locked out of use, food trollies that are either non-existant or can't get through the train, that is on top of trains cancelled. The service has been downgraded to a glorified tram service with trains that are not suitable for long distance running.

Malcolm

Malcolm, good to see you posting again. I don't really know First's record, but I had always thought Virgin had done a pretty good job. I think, as you say, it's more about money than service delivery.

I suspect that at the end of the day there could be a God book about all of this!

There must be a better way to run a railway

It is hard not to feel a nagging sense of unease about the wisdom of the decision to award the franchise to run the West Coast Main Line railway to FirstGroup

By Telegraph 7:43PM BST 15 Aug 2012

FirstGroup, which has bid successfully to run West Coast Main Line railway services between London and Scotland from December, are promising lower fares, more trains, new routes and less congestion. Who could argue with that? Not the Government, for one. It will receive around £700 million more over the 14-year franchise than was offered by the existing operators, Virgin, to invest in infrastructure. That must be a good deal for passengers and for the taxpayer; and yet it is hard not to feel a nagging sense of unease about the wisdom of this decision. We would not go so far as Sir Richard Branson, Virgin’s boss, in calling it insane. But it is a gamble, and possibly a costly mistake.

We should not forget that when Virgin took on the franchise for West Coast after privatisation 15 years ago, its service was not exactly a byword for efficiency and punctuality. There were complaints about late trains and complex ticketing. Yet in the intervening years, Virgin improved its performance significantly, helped, it must be said, by massive investment in upgrading the track. It does seem odd to withdraw the franchise just as the service reaches the point where it is widely praised. More worrying still is that FirstGroup has had an ill-starred tenure of the Great Western franchise.

Even though West Coast is the most lucrative of the 25 franchises, FirstGroup may have bitten off more than it can chew in agreeing to pay £5.5 billion for the contract. There have been two occasions in the recent past when successful bidders have overstretched themselves and have had to hand the franchises back because they were unable to meet their payments. The East Coast line is still being run by the Transport Department three years after National Express pulled out. There is no reason why FirstGroup should not be able to fulfil its promises, though in order to do so it must increase passenger numbers substantially. While this is a difficult target to achieve, more people are using the railways today than at any time since they were nationalised after the Second World War. A better service will encourage more travellers to take the train and leave the car behind.

But if Sir Richard is right, the Government will have some serious questions to answer, not least over the extent to which the hand of the Treasury directed this decision. Failure would raise fresh doubts over the long-term viability of the current split between operators and track, a system that requires an even bigger state subvention than British Rail received. A new approach whereby operators also own the track and can develop the stations and land might be a better way forward.

I have some huge difficulties in understanding the fixed-term franchise model used both in this case and in other instances too.

These franchises are essentialy a legal monopoly that is "sold" to the highest bidder for a fixed period of time after which unless the incumbent franchisee wins a re-bidding competition, he is forced to "shut up shop" just as Virgin Rail is now doing.

At the outset of the bidding process, the bidder knows that to win, he has to provide the best offer in a combination of cash and services. Upon winning the bid, the winner then is compelled to provide those services as promised under pain of penalties. In the case of First, it is additional trains, new routes and upgraded facilities.

That is well and good, but what incentive is there for the franchisee to continue with any upgrade program after that? The answer is, unlike a conventional competitive business, none. The incumbent franchisee knows that he has limited time to make a profit and that no matter what he may do and no matter how good he is during the franchise period, he could loose all his investments both material, such as trains, and human, such as training, to a new bidder at the end.

So guess what? rather than embark on a program of continuous improvement the franchisee merely implements the promised upgraded services at the outset and then sits back for the rest of the franchise period. The closer he gets to the end of his franchise, the less incentive there is to upgrade anything. The staff become more and more demoralised and much needed improvements do not happen.

It seems that this has progressively happened to Virgin Rail. Virgin started out by providing the much-improved service and the faster Pendolino trains that were promised in the bid. However, as time went by, why did Virgin not see a need to further improve by providing more trains and additional services on new routes as claimed to be neecessary by First? Why did Virgin also not improve its existing trains and provide, for instance, the wi-fi now promised by First? No on-going incentive, that's why.

What is the alternative? Probably good old open competition. Subject to minimum standards of safety and service, let multiple compaines run trains on the route, paying the infrastructure provider for each train run, in open competition with each other and for as long as they stay in business. Let the passenger (the customer) decide which of the competing companies he prefers, much as is done in the airline industry. That way all the train operators will have to provide services that their passengers want and continuously upgrade their facilities as often as necessary and to the latest standards required to keep those passengers on their trains. Of course, this way each provider will now want to pay the government and infrastructure provider the minimum possible so as to help to make its service the cheapest. The losers? Government essentially. The present incentive to offer the highest and most ridculous bid to government, the cost of which will be recouped without any alternative from the passengers using the legalised monopoly service, will be gone! With that, a multi-billion pound stealth tax will be gone too.

Steve wrote:What is the alternative?

Renationalisation!

Uuuurgh! Tired British Rail sandwiches with curry and chips in the diner? No thanks!

A whole generation of British comedians would have had less material for their stand-up routines if there hadn't been British Rail sandwiches!

In defence of British Rail, it was not always stale sandwiches.

I travelled frequently to London from the N.W. Leaving from Oxenholme. The train I took was known as the "Flying Kipper", as it became the boat train, meeting passengers from Ireland through Heysham. It also must have met with the Irish Sea fishing fleet, because they used to serve the most delicious and gererous breakfasts. Kippers and all.

Not only that, but the 18:05 return train from Euston had dining facilities and I would go there first on joining the train. The best part of the journey was spent in eating really nice food, well served whilst watching the 'plebs' thrash it out on the motorway.

Maybe even better than the SAR pie, gravy and chips? Hard decision....

Turtle

In answer to an invitation from a previous government to tender, proposals were received from Deutchebahn and the Swiss Federal Railway amongst others. The outcome was that they were rejected, the reason is unknown to me. The company finally chosen for a franchise appears to be the one that satisfies the government treasury requirements. Business plans and passenger requirements are perceived as something that is not even considered. The current system is so fragmented with many companies in the chain all trying to make a profit that the poor passenger is forgotten and is looked upon as a doner with very deep pockets.

On the subject of food on the trains, I remember travelling to London from Aberdeen on a GNER train. There was a restaurant car that served excellent food that would be well received in any restaurant, now the current operator has removed all the restaurant coaches and converted them to standard class seating coaches. The food during the seven + hour journey is a sandwich albeit brought to your seat when you manage to find a steward to do so. Now I go by air.

Rejected Virgin Rail bid for West Coast franchise officially more "deliverable"

Virgin Rail’s losing bid for the West Coast train franchise is understood to have been officially rated by the Department for Transport as a more “deliverable” offer than FirstGroup’s.

Telegraph
By Alistair Osborne, Busines Editor 9:00PM BST 16 Aug 2012

Shortlisted bidders for the London-to-Scotland line were today given feedback on how their bids were rated on the department’s “scoring matrix”. They have 10 days to challenge any ratings.

Industry sources said Sir Richard Branson’s Virgin Rail was rated top for “deliverability”. According to January’s Invitation to Tender document, that covers such things as “timetabling” for forecast demand and improvements to service quality.

On timetabling for demand, Virgin is thought to have easily beaten FirstGroup – even though the winning bidder forecast much higher revenue and volume growth to March 2026. FirstGroup is targeting 10.4pc annual revenue growth versus Virgin’s 8.5pc.

Controversially, FirstGroup is understood to have earned a higher rating for customer service despite the company being repeatedly outscored by Virgin in passenger satisfaction surveys. FirstGroup is also thought to have beaten Virgin on fleet delivery – even though, unlike Virgin, it is yet to finalise train contracts.

Under the rules, the department is only obliged to re-examine bids’ deliverability if they are priced within 10pc of each other. But FirstGroup’s offer of £5.5bn in net present value terms – or £10bn cash over the contract – was almost 15pc ahead of Virgin’s.

The official scores are believed to have done nothing to persuade Virgin founder Sir Richard Branson to drop his threat of a judicial review.

FirstGroup shares rose 1.9 to 245.1p yesterday, following Wednesday’s 6pc fall, though analysts continue to express concerns over the ambitious bid. Jaime Rowbotham at Morgan Stanley said: “Small changes in operating assumptions could turn this franchise very free cash flow negative.”

He said if Virgin’s revenue forecasts proved correct, FirstGroup would start making operating losses in the fourth full year, rising annually to reach £449m in the contract’s final year. In the last five years, total losses from would top £1.5bn.

Virgin, FirstGroup and the department all declined to comment.

FirstGroup shares slump after West Coast win risks ‘almost certain bankruptcy’

Rob St George, 15 August 2012 What Investment

The stock market has punished transport company FirstGroup for beating Virgin Trains to the franchise for running trains on Britain’s West Coast Main Line.

The firm’s share price has fallen 9 per cent to 235.8p. Even before the contract award, the stock was down by almost a quarter on its level a year earlier and lagged its travel and leisure sector by around 20 per cent.

There is a consensus from analysts that FirstGroup had, in offering £5.5 billion, paid too much to secure a franchise lasting 13 years. Virgin bid an estimated £4.8 billion.

FirstGroup is banking on an operating margin of 5 per cent and predicts revenue growth of 10.4 per cent.

Gert Zonneveld, a Panmure Gordon analyst, commented, ‘The double-digit revenue growth forecast looks aggressive and significantly higher than Virgin Rail’s 8.5 per cent. We believe there are substantial risks in respect of revenues falling short of expectations.’

Gerald Khoo, an analyst at Espírito Santo, agreed that the company’s ‘revenue growth assumptions appear highly optimistic’. He warned that ‘there may be substantial downside risk’ from the deal.

The gravest warning came from Sir Richard Branson, founder of the Virgin Group. Slamming the ‘insanity’ of the tender process, he claimed that FirstGroup faced bankruptcy.

Sir Richard said, ‘We did not want to risk letting everybody down with almost certain bankruptcy at some time during the franchise, as happened to GNER and National Express who overbid on the East Coast mainline. Sadly, the government has chosen to take that risk with FirstGroup’.

But John Lawson, an Investec analyst, dissented. ‘The debate is likely to rage for some time as to whether FirstGroup has overbid or not’.

‘From a FirstGroup viewpoint, however, this well-leaked win is a rare bit of good news, not just for the additional rail income for the next 13 years and 4 months, but also as it takes some pressure off the balance sheet’.

The immediate costs to FirstGroup will be high, though. It has promised to slash standard fares by an average of 15 per cent over the first two years of the contract, and will have to add 11 new trains, without job losses.

Tim O'Toole, FirstGroup’s chief executive, dismissed ‘all the dire predictions’. He assured sceptics that the company ‘has a track record of winning deliverable bids’.

But investors will recall that in 2011 FirstGroup had to step down from its Great Western franchise because the recession rendered the contract terms unsustainable.

Britain's railways braced for another round of arrivals and departures

The acrimony surrounding Virgin's loss of the west coast main line to FirstGroup marks the start of two hectic years of franchise auctions – and new concerns over the way the system works

Gwyn Topham, Dan Milmo and James Poulter
The Observer, Sunday 19 August 2012

The trouble with bidding to run the railways, muses one veteran of many franchise bids, is that the people who mark the bids are not supposed to know who they're marking. Fine in an exam; but, he says: "It's like the henhouse choosing security guards from whoever writes the best application letter, and only then finding they've given the job to Mr Fox."

Tim O'Toole, the head of transport giant FirstGroup, which has just landed the contract to run the west coast main line, will be doing his level best to keep his henhouse intact. Already the nation's biggest rail operator, FirstGroup will soon be running trains from London to cities up to Glasgow – ousting the Virgin brand from British railways, possibly forever.

But some question if FirstGroup will make good its promise to pay at least £5.5bn to the Treasury over the next 13 years, with the bulk of that sum to come towards the end. Labour has already accused rail operators of "gaming the system" after FirstGroup's decision not to take up the last three years of its Great Western franchise, to avoid paying £800m in premiums.

The defeated fury of Virgin's Sir Richard Branson took the headlines: he branded the decision "insanity" and a recipe for bankruptcy. While few expect a fiasco of the magnitude seen on the east coast franchise – when first GNER in 2006, then National Express in 2009 couldn't meet their financial commitments – the size of FirstGroup's bid raised eyebrows, including those of transport group executives eyeing the deluge of train franchises due to be to be awarded over the next two years.

For Virgin, the bruising rejection is compounded by the belief that they know the numbers better than anyone. FirstGroup's growth predictions were based on the government's – and as the Office of Budget Responsibility has shown, these can be as wildly optimistic as anyone else's.

And bidding is a costly, time-consuming business: train operators typically recruit dozens of consultants, squirrelled away with parts of the management for months, if not years, to tailor a detailed bid to the government's equally detailed specifications. Each company's plan can run to 1,500 pages: bid teams talk of working around the clock. Branson, four times thwarted now, has spent £60m in vain.

Some question who, consultants aside, gains from a system that often appears to end up with no more than a reshuffled pack of operators and new brand names on the trains. How could something as straightforward as trains on tracks throw up a system this convoluted? Franchising, critics say, is a messy compromise, a hybrid offspring of free-market ideology and misdirected EU regulation spawned in the John Major years, something no minister now has the energy to change.

But others laud the ejection of Virgin as proof that the franchising system is, as the Department for Transport demands, operating under the most rigorous rules. Anonymising code names are employed – FirstGroup's bid was referred to as "Reno" within the DfT. Ministers, meanwhile, are kept out of the loop until the winner's name is handed to them in a sealed envelope.

Yet most in the industry believe it would be impossible for the DfT's assessors not to quickly divine the identity of each bidder they mark on a "scoring matrix". That makes reports that FirstGroup's bid earned a higher rating for customer service – despite the contrary evidence of passenger satisfaction surveys – hard to fathom.

And cynics suggest the only number that really matters is the one that follows the pound sign. The highest cash offer hasn't always won – the ill-fated National Express winning tender for the east coast was actually outbid – but now the purse strings are pulling tight on the railways as much as anywhere else: in March, transport secretary Justine Greening declared that she wanted to save £3.5bn a year by 2019.

There is a textbook for this new era of austerity on the railways. Last year saw the publication of a report into the industry's costs and structure by Sir Roy McNulty, former chairman of the Civil Aviation Authority. Commissioned by the Labour government, it was also backed by the coalition, which saw a perfect fit between McNulty's cost-cutting agenda for the railways and its wider commitment to cut the deficit.

Speaking after it was published, McNulty said: "There is a clear imperative to give both farepayers and taxpayers a better deal. This industry has a serious cost deficiency issue to address. Everyone concerned must be aware that passengers are paying above the odds."

As his reference to both the state and the passenger suggests, however, any reduction in fares must be achieved alongside a cut in the subsidy. The multibillion-pound figure attached to the west coast deal could be viewed as a watershed in a drive, launched by Labour in 2007, to tilt the funding burden of the railways away from the taxpayer to the farepayer. Currently, passengers pump £6.6bn into the railways per year compared with £4bn from the government. But once passenger revenues are subtracted from costs, the industry has an operating deficit of £4.3bn. A gap that big is not sustainable if the industry wants to grow further, says McNulty.

McNulty's original thesis was that Britain's railways cost 40% more than they do in France, the Netherlands, Sweden and Switzerland, and that £1bn a year could be shaved from industry expenditure by the end of the decade – an ambition Greening tripled.

In the list of causes for this apparent profligacy, McNulty includes "a franchising system that does not encourage cost reduction sufficiently". All bidders for the west coast franchise were expected to show some awareness of McNulty's conclusions, although there was no explicit call for mega bids like FirstGroup's. With repeated references to excessive costs, perhaps there was no need to state the obvious.

And certainly not to O'Toole, who leads industry body the Rail Delivery Group, which was set up to find ways to implement McNulty's vision.

O'Toole said cost-cutting was only a small proportion of his west coast bid – a less brutal approach, he believed, than rivals. Despite dark warnings from the RMT union, O'Toole maintains that services will be enhanced, from smart ticketing and free Wi-Fi to the onboard catering – even pledging comfier seats.

Yet few commuters in Friday morning's rush hour at London's Paddington station had encouraging words for those about to experience the FirstGroup effect. Artist Richard Learoyd, 45, who regularly travels to Bristol on FirstGroup's trains, said: "Kicking Mr Branson out is an appalling waste of time and a folly. First Great Western are a poor service."

Waiting for a delayed train, Stephen Ellis, 29, from Brixton, said: "All these companies are out to make as much profit as they can. The service on First Great Western is pretty appalling. They don't seem to care very much about their passengers and trains are always cancelled."

Over at Euston, the London terminus for the west coast main line, Sarah Kingsley, 37, from Manchester, was "shocked". "I travel with Virgin fairly often and think it's a really good service. It seems crazy that someone can run it for 12 to 15 years and then it moves on to another business."

The internal workings of the rail industry – the circuitous flows of obligations, contracts, operators, profits and costs – can seem as complex as a Pendolino power car. The real changes this deal brings about will not emerge as Virgin's red livery disappears on 9 December, nor will they ever be as obvious. If FirstGroup does deliver a service to equal or better Virgin's, while sending the best part of a billion pounds more than its competitor promised back to the Treasury, it will prove to have been the right choice. But it will be years before anyone can be sure if the growth that FirstGroup and the government are banking on will materialise.

And while the franchise mill slowly grinds, passengers around the country are digesting news of a 6.2% fare price hike, making Greening's promise to end the "era of inflation-busting fares" look a long way off.

Back at Euston, Ken Adams, 66, heading north from his home in Wanstead, questioned the whole point of the bidding process: "Civil service bullshit, isn't it? They know the cost of everything and the value of nothing. Five years down the line the franchise will go bust, and we'll be like we were on the east coast."

West coast rail petition calls for franchise to be reconsidered

E-petition signed by more than 100,000 people likely to trigger parliamentary debate on decision to award route to FirstGroup

Gwyn Topham, transport correspondent
guardian.co.uk, Friday 24 August 2012 20.14 BST

More than 100,000 people have signed an e-petition calling for the west coast rail franchise award to FirstGroup to be reconsidered – a figure that is likely to trigger a parliamentary debate on the decision.

The numbers grew through social media campaigns, including tweets from several high-profile sympathisers with Virgin, the company which has been running the train service from London to Glasgow since 1997.

The e-petition was created by a rail passenger from Scotland, Ross McKillop, stating: "The west coast mainline's current value is thanks to millions of pounds of investment and commitment from Virgin Trains – they're not perfect, none are – but they have delivered a reliable service for 15 years and turned the line around."

McKillop, 29, an IT consultant and lighting designer, from Glasgow, said he was independent of Virgin and other campaign groups that have since supported his petition.

He said: "I can't think of a time when so many people have rallied around a private company. The impression I've always had is that they're good people to deal with and that means something to customers, even if it doesn't mean anything to the people at the Department for Transport. I'm not sure that behind closed doors is the right place for these kinds of decision to be made."

Eddie Izzard, Stephen Fry and Joey Barton are among those who have re-tweeted links to the petition.

An e-petition that garners more than 100,000 signatures will be considered by the backbench business committee for debate if MPs make the case. Ten previous e-petitions have passed that mark, with parliamentary debates over the Hillsborough disaster and the extradition of Babar Ahmad among others.

The DfT announced last week that FirstGroup had won the franchise, to run the service from 9 December this year until 2026, with a core bid of £5.5bn, a sum that Virgin Rail co-owner Sir Richard Branson said would spell bankruptcy.

A FirstGroup spokesperson said: "We appreciate that Richard Branson is a high-profile celebrity with millions following him personally on social media. However, our business is transport – first and foremost. We are introducing major improvements to the InterCity west coast franchise to enhance the customer experience, including improved WiFi and catering, as well as additional services and more seats and reducing standard anytime fares by 15% on average.

"We have a long and proven track record in running rail services and will be delivering better value for taxpayers. We look forward to welcoming all customers to their new and improved service from December."

A Virgin spokesman said: "Richard does have celebrity friends, but he doesn't have 100,000 celebrity friends."

He added that the franchise decision needing debating in parliament as it was "a nonsense to make an announcement as big as this in the middle of summer when there is no minister around to answer questions".

Commons transport committee chair Louise Ellman said a request to the transport secretary, Justine Greening, to delay signing off the contracts until MPs could scrutinise them had apparently been rebuffed.