Sir Richard Branson has a remarkable talent ; not necessarily for running airlines , banks
or railways – he employs hard-nosed industry professionals to do that – but for
securing great and usually positive media coverage for even his most self-serving actions . We have
seen that yet again over the past week or so in the manner that so many people
, from commuters and rail travellers to former government ministers and people
who probably never travel on a train , have fallen over themselves to tell us what a tragedy it is that Virgin Rail lot the West
Coast franchise to First Group.
For that you have to admire him , and also recognise that that
other hard-nosed business people admire his talent for positive publicity as
well. After all, when Sir Brian Souter of Stagecoach and Singapore Airlines are
both willing to accept a 51:49 ownership in favour of Branson in respect of
their respective joint ventures [ Rail and Air travel ] there must be good reasons
for that .
What is more remarkable in
this affair is that shadow ministers and
opposition MPs who should be calling for the whole franchise arrangement
to be wound up are – in effect – supporting a company whose engagement in rail travel has
been a form of ‘subsidy farming ‘ and who want to continue doing that for
another few years .
There seem to me to be several different aspects of this that have been overlooked
in all the heat and sound .
1.
Although it is difficult to assess the overall
price of a multi - year contract
agreement , for an incumbent to lose to a competitor by 10-15% of overall price
is not totally unknown in re-tendering
exercises. Even before the decisions were made , investment analysts were suggesting that First would win .
2.
The finances and returns of the various Virgin
companies are hard to penetrate and understand . Overall ownership is shared in
diverse forms and in some instances Virgin has secured naming rights for a very
small proportion of the equity invested . Ultimate domicile and ownership of
the group companies is hard to track
through various legal domiciles . It is a private company , which given the scale
of business operations would normally raise some eyebrows in the city…….
3.
Because the finances are so obscure any
attempt to make a straight assessment of
the income and expenditure is of limited value . Some people have tried [ the
indefatigable Eion Clarke for one ] but the figures produced are so rogue
they don’t help a lot .
4.
Virgin group appeared happy with the tendering
process until they lost – a common reaction of unsuccessful contract incumbents
– and critically commented on by the Financial
Times yesterday . The recent counter
– proposal from Virgin Air of wasting
Heathrow slots on domestic flights from Manchester smacks of the most childish spite and is hardly consistent
with claims to : “…Get
low carbon: Strive to emit minimal
carbon and other greenhouse gases.1 planet not 2: Learn
to use the planet’s finite resources responsibly.”
5.
I accept that both First and Virgin are
serious players in this game and so knew exactly what they were doing in their
respective bids ; if First are close in
their suggestion of what can be squeezed out in revenues over the franchise period , and
Virgin had won at a lower price , Virgin would have walked away with a substantial
return . It seems clear that both companies were gaming the system here ?
6.
That they were both gaming the system confirms
why there is now a widespread acceptance
that the Major rail privatisation was disastrous in both form
and consequences . It’s sometimes fascinating to see how The Guardian can
contain Seamus
Milne and Sir Simon Jenkins on the same page but on this issue both of them
have been in agreement for a long
time .
Unfortunately for all of the rest of , whether as citizens or passengers
, there isn’t a party represented in
Westminster that appears willing to address
the many failures of rail privatisation . Cosying up to a man with a beard who doesn’t wear a
tie is not a policy that helps retrieve our rail network .
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