FIRSTGROUP and an Italian-owned train operator is to take over the running of west coast trains connecting Scotland to London from December - despite an ongoing legal row.
The Aberdeen-based rail and bus company in a joint venture with Trenitalia has won the West Coast mainline train route franchise, and said it would pave the way for an era of high-speed rail.
The decision comes despite opposition from some of FirstGroup's shareholders, concerns about the financial viability of its other franchises and a legal action from at least a Scottish bidder.
It means that from December nearly two in three British rail journeys will be on foreign-owned services.
READ MORE: Travel delays on West Coast Main Line after tracks are flooded
Judges gave train companies Virgin, Stagecoach and Arriva the okay to pursue legal action against the Department for Transport after they were barred from bidding for rail franchises earlier this year. The companies’ bids were deemed “non-compliant” after they refused to take responsibility for billions of pounds of pension liabilities.
Perth-based Stagecoach, Sir Richard Branson's partner in Virgin Trains which has run the franchise since March, 1997, confirmed that it will continue its legal action. It is also seeking a judicial review.
On Wednesday a Stagecoach Group spokesman said the company’s legal action would continue saying: “The Stagecoach-Virgin partnership and our fantastic team at Virgin Trains have made a huge contribution over the past two decades to driving growth and innovation on Britain’s railway.
“We are incredibly proud of everything our people have achieved, and the positive and lasting legacy they leave for our customers.”
Mr Branson said he was "devastated" by the development sayinghe was “proud” to have run the rail services for more than two decades.
“The recent period of uncertainty has been challenging for everyone at Virgin Trains, but I am so very proud of how hard they have all worked to maintain our high standards of customer experience during this time,” he said.
First Group chief executive Matthew Gregory dismissed suggestions that the legal action could derail the new contract.
READ MORE: FirstGroup fends off directors’ pay revolt at AGM
“We have signed a contract today and it’s not really for us to talk about the outcome of that case but as far as we’re concerned we have a contract,” said Mr Gregory.
Asked whether there was anything in the contract that could be triggered should their competitors win their legal challenge, Mr Gregory said: “Simple answer: no, there’s nothing in the contract like that.”
He added that pensions costs were “effectively priced... into our bid”.
FirstGroup has also been under pressure from its largest shareholder, US-based Coast Capital, the US activist investor, over its management of rail contracts and previously threatened to sue the board if it took on more rail contracts.
FirstGroup already runs three other UK rail franchises, including the Transpennine Express contract where performance was said to have deteriorated.
James Rasteh, Coast’s chief investment officer, said in May that FirstGroup would be “absolutely foolish” to bid for further rail franchises and accused management of a “lack of logic”.
He said earlier in the year that he would “hold each member of the management team and [each] board member personally and fully accountable if the company enters any new rail franchise”.
An attempted coup led to the resignation of chairman Wolfhart Hauser, despite winning the backing of a majority of shareholders. The search for a new chairman is said to be “proceeding at pace".
The First-Trenitalia bid was picked over Chinese consortium led by the Hong Kong operator MTR, First’s partner on South Western.
Transport Secretary Grant Shapps said the bid was part of a shift to a new model for rail.
The partnership was supported by Keith Williams, who has been commissioned to look at changes to the rail franchising system.
Keith Williams, who is leading a government rail review and has already said that franchising must change, endorsed the West Coast Partnership contract as “a step forward that is firmly in line with the review … capable of incorporating the reforms needed for the future”.
Mr Shapps said:“This award is positive news for passengers, with more services, more direct connections and ambitious plans for a cleaner, greener railway, and also represents a decisive shift towards a new model for rail."
And he added: "We need them [the rail companies] paid for running the blooming trains on time and not for doing a bunch of other things. And that's what this new contract on the West Coast is about."
READ MORE: Activist escalates hostilities in war of words with FirstGroup
The first phase of the partnership will run from December to March 2026, when First Trenitalia will operate the existing InterCity West Coast services. The second phase will run from March 2026 to March 2031, when it will operate the HS2 high-speed rail service.
The shadow transport secretary, Andy McDonald, said that awarding First such a complex contract was “a gross error of judgment”.
The RMT union said the award, coming on the day higher rail fares are confirmed, was “another political fix by a government whose privatised franchise model is collapsing around their ears”.
Its general secretary, Mick Cash, said the government was “taking yet another gamble on the crucial west coast lines with one of the dwindling number of private operator consortia left in the game”.
A spokesman for MTR said it was “very disappointed” to miss out on the contract, adding “we felt that our bid was highly competitive, bringing together the best of MTR’s proven track record for providing excellent passenger service with extensive global experience in the design and operation of High Speed Rail services”.
“We will seek clarification from the Department for Transport about why we were unsuccessful.”
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