Virgin reckon WCML was a "struggling rail artery"

[Wath Yard]

If 2 companies make an agreement and one of them fails to deliver its side of the agreement why should the other party suffer as well?

Seriously? Two private sector companies enter into a high risk project in which they will reap huge profits if it succeeds but one of them shouldn't suffer the consequencies if it fails? Remember PUG2 was purely a scheme devised by Railtrack and Virgin Trains and had nothing to do with the initial plans to upgrade the WCML.

You do realise there were technically 4 parties involved in the PUG2 project:

Railtrack - shareholders lost out when the company went into administration
Passengers - lost out with a decade of disrupted travel but didn't reap the promised reward of a 140mph railway
Tax payers - lost out to the tune of £2-£3 billion when the huge premiums promised turned into a huge subsidy, and were also left to pay the bill for the upgrade
Virgin Trains - won.

In what other area of business would the Government bail out one company because it enterered into an agreement with another private sector company and the deal went sour?

 

[HH]

Last years results, Franchise payment to Government from Virgin £110m profit £55.7m, revenues of £753million. Go back couple of years, 2008 revenue £581m subsidy £119.61m profit £56.45m. 2009 revenue £611m, profit £76.42m subsidy £24.1m.

Its pretty clear Virgin have continued to grow revenues, gone from subsidy to franchise payments and profitability declined.

You left out 2010. Payment to Virgin £20.1m, profit £69.7m, revenue £679m.

You also ommitted to say one reason for the change in subsidy was that Virgin's payments to NR reduced considerably under CP4, which led to a contractual change in the franchise premium.

Then there's the fact that NR network change was reducing income in the earlier years, for which they received considerable compensation. Add that to the earlier revenue line and their revenue growth doesn't look anything special.

Would you still like to stick with your conclusions? Or were you just fooled by the Beardie PR machine?

 

[tbtc]

Agreed, but this thread is about Virgin not LM. I would call it disingenuous to say the least to claim that one of the benefits of Virgin is a better local service along the Trent Valley !

I'm not praising Virgin for the LM service, just saying that some people seem to think that the Trent Valley stations all had a fast Intercity service before Virgin came along - the actual service that places like Tamworth (low level!) get these days is a lot better (albeit with a different TOC).

 

[Mr Spock]

Seriously? Two private sector companies enter into a high risk project in which they will reap huge profits if it succeeds but one of them shouldn't suffer the consequencies if it fails? Remember PUG2 was purely a scheme devised by Railtrack and Virgin Trains and had nothing to do with the initial plans to upgrade the WCML.

You do realise there were technically 4 parties involved in the PUG2 project:

Railtrack - shareholders lost out when the company went into administration
Passengers - lost out with a decade of disrupted travel but didn't reap the promised reward of a 140mph railway
Tax payers - lost out to the tune of £2-£3 billion when the huge premiums promised turned into a huge subsidy, and were also left to pay the bill for the upgrade
Virgin Trains - won.

In what other area of business would the Government bail out one company because it enterered into an agreement with another private sector company and the deal went sour?

The subsidy paid to Virgin was because the rules concerning payments of track access charges were chamged which almost trebled Virgins charges to Railtrack, these payments were just passed straight to Railtrack/Network Rail i.e. the government made payments to Railtrack/Network Rail via Virgin instead of making them direct.

Railtrack going intro administration was not Virgins fault.
Ten years of disruption was not Virgins fault.
See above re the subsidy which was not Virgins fault.

 

[Bald Rick]

Virgin also failed to keep their side of the PUG1 / 2 deal by having the full Pendolino fleet in service no later than June 2002.

 

[Geezertronic]

Virgin also failed to keep their side of the PUG1 / 2 deal by having the full Pendolino fleet in service no later than June 2002.

Was that their fault or was it down to the teething problems?

 

[ole man]

I think virgin have every right to claim that the WCML was a struggling artery.
Though not entirely down to themselves they have helped improve and changed the way rail transport is now looked at in the UK.
Virgin have fought for a better railway, though taxpayers have helped them more than they should of.
Virgin have every right to say they have improved the WCML, faster, more modern trains, they did nothing wrong in getting what they could from the government/Network Rail, it's called business.

 

[HH]

'They have every right'. 'They did nothing wrong'. While true these surely avoid the issue. Virgin West Coast have taken a huge hunk of profit at practically no risk. No shame on them for doing so; shame on the DfT for letting them.

 

[Snapper]

In what other area of business would the Government bail out one company because it enterered into an agreement with another private sector company and the deal went sour?

It's called a contract. The Rail Regulator at the time (Tom Winsor) was rather acerbic about Railtrack saying 'pretty please, can we be let off because we were incompetent and got it wrong?'

In truth, If virgin had been that mercenary, they could have taken Railtrack to the (legal) cleaners and received far more than they ever did. So, think about that when you talk about 'bail outs'
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Was that their fault or was it down to the teething problems?

I did mention it earlier on. They were let down by Alstom as the trains were late being delivered.

It's all water under the bridge now as the relationship between Alstom and Virgin is one other companies come to learn from.
--- old post above --- --- new post below ---

Virgin West Coast have taken a huge hunk of profit at practically no risk.

No risk? The whole story of the WCRM and spending money on 140mph trains that can only ever be used at 125 is just one huge risk! -as was the fact that for many years the WCML was a M-F only railway!

 

[HH]

It's not a risk if you are covered off financially by the government.

 

[WatcherZero]

You left out 2010. Payment to Virgin £20.1m, profit £69.7m, revenue £679m.

You also ommitted to say one reason for the change in subsidy was that Virgin's payments to NR reduced considerably under CP4, which led to a contractual change in the franchise premium.

Then there's the fact that NR network change was reducing income in the earlier years, for which they received considerable compensation. Add that to the earlier revenue line and their revenue growth doesn't look anything special.

Would you still like to stick with your conclusions? Or were you just fooled by the Beardie PR machine?

No because I had already been the one to point the compensation out earlier. In three years turnover increased £300m, despite going from recieving 100m in subsidy to paying out an equal amount in franchise payments, profitability declined.

It's not a risk if you are covered off financially by the government.

Revenue support exists to cover for swings in fare income but the capital in the huge bond taken out with the Dft and all their own investment is fundamentally risked. If a train malfunctioned its the franchise that loses money, if theres a fire its the franchise that loses money, in fact anything whatsoever that goes wrong outside of a change in bums on seats the Franchise is left holding the can. If there was no risk by the Franchisee, all by Government then how could a franchise ever post a loss?

 

[Snapper]

It's not a risk if you are covered off financially by the government.

You are not 'covered off' by the Government. You can still lose money and suffer reputational damage (as Virgin did when the WCML was a building site but passengers blamed Virgin). Also, you spend millions bidding for a franchise or franchises that you might not win/keep.

 

[WatcherZero]

Just funding a franchise bid costs £20-£25m and you will be up against 4 or 5 other bidders.

 

[HH]

Just funding a franchise bid costs £20-£25m and you will be up against 4 or 5 other bidders.

It can cost you that much. It certainly doesn't have to.
--- old post above --- --- new post below ---

No because I had already been the one to point the compensation out earlier. In three years turnover increased £300m, despite going from recieving 100m in subsidy to paying out an equal amount in franchise payments, profitability declined.

And I pointed out that much of the subsidy change was because their NR access charges were cut by more than 50%. And that previously they had been receiving large payments from NR as compensation for Network Change. Their figures aren't as impressive as you make out.

Revenue support exists to cover for swings in fare income but the capital in the huge bond taken out with the Dft and all their own investment is fundamentally risked. If a train malfunctioned its the franchise that loses money, if theres a fire its the franchise that loses money, in fact anything whatsoever that goes wrong outside of a change in bums on seats the Franchise is left holding the can. If there was no risk by the Franchisee, all by Government then how could a franchise ever post a loss?

The huge bond is easily covered by the hugely positive cashflow that is generated by VWC. VWC maintain no trains, so it is likely that they get compensated in the event of train failure. If there's a fire it is likely that NR will have to pay Schedule 8 that exceeds the loss. If there is a change of bums on seat then the government picks up 80% of the loss.

VWC has been managed very well from a contractual point of view. They have maximised profit and minimised risk, for which I admire them. All I'm saying is that you need to take this into account when you look at how they done (answer = very nicely indeed).