After announcing in November that the government would allow Stagecoach and Virgin to pull out of their East Coast Mainline franchise agreement three years early, transport secretary Chris Grayling has now said Stagecoach can only continue running the line “for a small number of months”.
According to the BBC, Grayling told the House of Commons that the situation was “much more urgent” than originally thought and that alternative arrangements “in the very near future”.
Stagecoach owns 90 per cent of the franchise, while Virgin owns the remaining 10 per cent. The joint venture took over running the London to Edinburgh route in 2015 under a contract that ended in 2023. However, the Department for Transport agreed to allow the two operators to pull out of the agreement in 2020 after it was revealed they had run into difficulties and continuing the franchise would cause ‘significant financial loss.
Virgin Group owner Sire Richard Branson blamed the shortfall on delays to upgrades to the infrastructure by Network Rail, which he said would cost the companies “hundreds of millions of pounds”.
The decision was cited by former chair of the National Infrastructure Commission Lord Adonis as one of his reasons for resigning, calling the move a “bailout” for Stagecoach and Virgin.
Grayling told the House of Commons on Monday that Stagecoach “got its numbers wrong” and that it “overbid and is now paying a price”.
He put forward two options for running the line in future, including a not-for-profit operation by Stagecoach and re-nationalisation of the line through another operator. He also said the situation was “a stark warning to any company tempted to over-bid in future.”
During the same announcement, Grayling said Stagecoach and Virgin had won an extension to operate the West Coast Mainline service between London and Glasgow until 31 March 2020. A Stagecoach subsidiary is also in the running to operate the East Midlands franchise from August 2019.