Rejected Virgin Rail bid for West Coast franchise officially more “deliverable”

Shortlisted bidders for the London-to-Scotland line were today given feedback on how their bids were rated on the department’s “scoring matrix”. They have 10 days to challenge any ratings, reports The Telegraph.

Industry sources said Sir Richard Branson’s Virgin Rail was rated top for “deliverability”. According to January’s Invitation to Tender document, that covers such things as “timetabling” for forecast demand and improvements to service quality.

On timetabling for demand, Virgin is thought to have easily beaten FirstGroup – even though the winning bidder forecast much higher revenue and volume growth to March 2026. FirstGroup is targeting 10.4pc annual revenue growth versus Virgin’s 8.5pc.

Controversially, FirstGroup is understood to have earned a higher rating for customer service despite the company being repeatedly outscored by Virgin in passenger satisfaction surveys. FirstGroup is also thought to have beaten Virgin on fleet delivery – even though, unlike Virgin, it is yet to finalise train contracts.

Under the rules, the department is only obliged to re-examine bids’ deliverability if they are priced within 10pc of each other. But FirstGroup’s offer of £5.5bn in net present value terms – or £10bn cash over the contract – was almost 15pc ahead of Virgin’s.

The official scores are believed to have done nothing to persuade Virgin founder Sir Richard Branson to drop his threat of a judicial review.

FirstGroup shares rose 1.9 to 245.1p yesterday, following Wednesday’s 6pc fall, though analysts continue to express concerns over the ambitious bid. Jaime Rowbotham at Morgan Stanley said: “Small changes in operating assumptions could turn this franchise very free cash flow negative.”

He said if Virgin’s revenue forecasts proved correct, FirstGroup would start making operating losses in the fourth full year, rising annually to reach £449m in the contract’s final year. In the last five years, total losses from would top £1.5bn.

Virgin, FirstGroup and the department all declined to comment.