UK government cancels Virgin Trains decision

[October 03, 2012]  LONDON (AP) -- The British government on Wednesday scrapped a decision to strip Richard Branson's Virgin Group of a major rail franchise, citing significant flaws in the way a new operator was chosen.

The government announced in August that it was awarding a 13-year franchise to run the west coast London-to-Scotland service to Virgin's rival, FirstGroup.

Branson, who had at the time questioned whether FirstGroup could meet its financial commitments, on Wednesday praised transport authorities for reconsidering their decision. He said he was hopeful Virgin could continue running the franchise.

FirstGroup said it was "extremely disappointed" at the news. Its shares plunged about 20 percent Wednesday morning, trading at 198 pence.

Virgin has run the route since 1997, doubling annual passenger levels and introducing high-speed trains.

Transport Secretary Patrick McLoughlin canceled the competition to run the line because of "deeply regrettable and completely unacceptable mistakes" made by his department in the way it managed the process.

He said staff had been suspended and an investigation had been launched. The bidding process will be rerun.

The uncertainty over the line's franchise prompted concern about the economy in the region. Adam Marshall, director of policy at the British Chambers of Commerce, said that the government needed to move quickly to ensure that investment in the railway network does not suffer.

"The West Coast line is one of Britain's most important business corridors, and companies in cities up and down the country will be concerned that this situation could affect both current services and future investment in critical passenger services," he said.

[Associated Press]

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