Sir Richard Branson has defended the government bailout of the virgin trains East coast, said he and partner firm stagecoach has lost more than 100 million pounds by running the route.
In the first public comments by virgin group owner on the controversy, he said that “to promise a huge update” line, which will delay meant “a conversation with state had to happen.”
Railway company, a joint venture with the Virgin branding, but 90% owned by transport firm stagecoach, won the contract to run the East coast line after it was privatized in 2015. He had to pay $ 3.3 billion to the government, the bulk of payments goes to the last years of his eight-year term. But Secretary for transport Chris Grayling announced the contract instead of over at the beginning of a new “partnership” – potentially still operated by stagecoach – starting in 2020.
Lord Adonis has set in motion, alongside a British exit from the EU strategy of the government, as the reason for his resignation last month from the government as the Chairperson of the Commission of the National infrastructure. On Friday, the Adonis welcomed what he called the reception of Branson that bailout occurred at the grayling continues to avoid debate on this topic.
Branson announced that £3.3 bn in bets was “based on several key assumptions,” which was not successful. Writing in his blog, he said that the modernization of the infrastructure on the East coast via the rail network will increase the reliability of the track and allowed the maid to carry many passengers. He said, “a significant delay upgrades to new trains, as well as poor reliability track will cost us a significant shortfall in income (amount to hundreds of millions of pounds) and torpedoed the direction of our original bet.
“As the facts became clear about these issues (as well as falling GDP growth in the UK) a discussion with government was held and a pragmatic solution was necessary in order to provide improvements and investment in line”.
Ridership did not meet expectations virgin from the beginning of the franchise, with intercity trains mirroring the wider economic uncertainty and sluggish growth in the UK. However, the government priority is to return East coast to private sector after the state Dor ran it for six years, the stick was as a model for renationalising railway.
However, Branson said: “for operation of the East coast was in public ownership until we had a few investments and services that have not been upgraded. Contrast that with the £140 million we invest, which is completely renovated rolling stock, additional services, new Parking and cycle room with free movies and TV on Board.”
The President of the virgin added: “critics argue that my partners in stagecoach and I somehow benefit from this. The fact that we both lost significant amounts of money – more than 100 million pounds in total and have not received a penny of dividends.”
He said that they can “swallow these losses and just walk away from the franchise, as has been done before.” Two previous operators gner and national Express abandoned its franchise obligations – the latter after he had refused such aid to Greece Adonis, the then transport Minister in 2009. But, Branson said, “It would be easier. But it would be wrong. It will bring an abrupt end to investment and improvement that flow to the East coast. It would mean more inconvenience for passengers, communities and our people.”
Reacting to the comments of Branson, Adonis said: “I am delighted that sir Richard Branson was much more negative than Chris Grayling about what happened on the East coast. He honestly admits that the losses became too big for virgin and stagecoach, and that they proposed to leave. He also States, they negotiated with the government on more favourable terms – it is the bailout I’m exposing in recent weeks.
“In good times, sir Richard and his fellow billionaire Brian Souter [stagecoach Chairman] brought him in contact the state railway. Now he says they are not ready to bear the additional losses, despite the billions they earned from the train contracts so far”.
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