Passengers and taxpayers winners in new Virgin Trains contract
· Thousands of extra seats each day
· Free superfast WiFi for all customers
· New direct services planned for Shrewsbury and Blackpool
· Rewards programme adds value for passengers
· New franchise deal boosts payments to taxpayer by 58%
Virgin Trains and the Department for Transport have signed a new deal guaranteeing big improvements for both passengers and taxpayers. The new West Coast franchise will run until March 20171 and will see significant improvements for customers with the introduction of free superfast WiFi, more seats and new services. Taxpayers will also benefit with a guarantee that more than £430m will be paid to government, a rise of at least 58% on the current arrangement.
The new West Coast contract comes into force on 22 June and will provide:
· More seats: 21 of our trains2 will have one of their First Class carriages converted to Standard Class. This will increase Standard Class capacity by 5500 seats per day, a net increase of 2100 seats.
· Better connectivity: All 76 of our Pendolino and Super Voyager trains will be equipped with superfast WiFi, which Network Rail intends to support by providing track-side infrastructure. This would be the first major intercity deployment of 4G technology on the UK rail network and provide free WiFi to all customers.
· New services: We have agreed with the DfT plans for new direct services between Shrewsbury / Blackpool and London. We have been working with Network Rail to develop these plans and will make a joint submission to the ORR shortly. These services are expected to start by December 2014.
· Customer reward programme: Customers who book via the Virgin Trains website or mobile app will be able to earn Nectar points on their purchase by the end of the summer.
· Financial benefits for taxpayers: The contract means the DfT will receive a guaranteed payment of more than £430m over the length of the contract, as well as up to 100% of the additional returns generated by Virgin Trains3. The fixed premium represents an increase of at least 58% per year4 and will help support the huge investment that is taking place in the railways.
Patrick McCall, Virgin Trains Executive Co-Chairman, said: “We’re delighted to have reached a deal after some tough negotiations with the DfT. It puts the problems of 2012 firmly behind us, and shows the clear benefits of a well-run franchise system.
“This deal is great news for passengers and taxpayers, with significant benefits for our customers as well as a big increase in the money we pay to government. We know WiFi is high on our customers’ priorities and we’re delighted that we’re going to be able to offer them free and super-fast WiFi. Together with thousands of extra seats and plans for new services, this deal will mean big improvements for millions of Virgin Trains passengers.”
The deal also includes other benefits such as:
· Customers: More than £20m to be spent on modernising stations with improved waiting rooms, extra ticket machines, more Passenger Information help points, as well as an upgraded website and more staff redeployed to concourses and platforms
· Community: Increased emphasis on apprenticeships, traineeships and graduate placements, a pledge to increase SMEs in supply base by 10% and commitment to make station and training centre facilities available for community use
· Environment: Commitment to cut CO2 emissions across stations, divert 98% of waste from landfill to recycling and implement efficient LED lighting
Martin Griffiths, Virgin Trains Executive Co-Chairman, said: “This new contract is a good example of the benefits of the franchising system. With commercial train operators taking on the cost of investing in new services the passenger experience can be improved without public money being put at risk. As the improved passenger experience then encourages greater train travel, taxpayers benefit a second time with more money flowing to the Treasury.”
The deal builds on the huge progress Virgin Trains has made since taking over the West Coast franchise in 1997. The number of passengers carried each year has more than doubled to 32 million, journey times have been cut and the number of services increased. More than £2bn has been invested in trains and passengers have consistently rated us as the best long distance operator.
Notes to editors:
1) After the West Coast franchise process in 2012, the DfT asked Virgin Trains to continue running the franchise on a management basis. This arrangement ran the service on an efficient basis but did not allow Virgin Trains to invest in new initiatives. The new deal moves the franchise back onto a commercial footing, with Virgin Trains shouldering the risk and cost of improvements. The new deal commences on 22 June and will run until the end of the franchise in March 2017. The DfT has the option to extend the deal by an additional year should it wish to.
2) Coach G on all 21 9-car Pendolinos will be converted from First Class to Standard Class by September 2015.
3) The £430m is the guaranteed premium Virgin Trains will pay the Government over the contract from 22 June to end March 2017, as long as the economy performs in line with expectations. If Virgin Trains’ returns exceed expectations, the Government will take an increasing share of additional profits on top of the guaranteed premium. The more that returns increase, the greater the percentage of that extra profit the Government receives until above a certain level it receives 100% of the additional profit. The exact tiers and percentages are commercially sensitive.
4) The £430m is for 22 June 2014 to 31 March 2017 and equates to £155.3m per year. In the management contract from December 2012 to 21 June 2014 we paid £150.9m, or £98.1m per year. £155.3m is a 58% increase on £98.1m.
