Branson out to derail FirstGroup's franchise bid

 

LONDON BRIEFING:SIR RICHARD Branson is master of the PR stunt; who can forget the image of the entrepreneur wearing full make- up and wedding dress for the launch of the now-defunct Virgin Brides venture in 1996?

Then there was the drive down 5th Avenue in an armoured tank to mark the launch of Virgin Cola; a painful bungee jump off a Las Vegas hotel roof; numerous hot air balloon adventures . . . the list goes on, including Virgin’s recent television campaign for superfast broadband featuring the bearded entrepreneur and Olympian athlete Usain Bolt.

The shameless self-promotion, cheesy ads and willingness to send himself up has won Branson a sizeable following over the years, particularly among the young, and he is often referred to as Britain’s most popular businessman.

Now the Virgin boss is employing all his talents for publicity – and more than a few lawyers – in the increasingly ill- tempered battle by Virgin Trains to retain control of the West Coast main line rail franchise.

Virgin has run the inter-city passenger service from London to Scotland since 1997. Earlier this month though it lost out to rival rail operator FirstGroup, Britain’s largest rail company, when the 15-year franchise was put up for grabs again.

FirstGroup put in a higher bid, but a furious Branson branded the bidding process “insane” and demanded an immediate review.

As he stepped up his protests against the decision, Branson first declared he would pull out of the rail business altogether but then made an extraordinary offer to run the rail line for free to allow parliament to launch an inquiry into the bidding process.

At the same time, popular support has been stirred up in an e-petition urging the government to reconsider its decision, with more than 155,000 signatures so far, including comedian Eddie Izzard and illusionist Derren Brown, who have urged others to sign.

Yesterday evening, new names were being added to the petition at the rate of more than 1,000 an hour – an extraordinary level of support for a company and testament to Branson’s popularity among the public. The rule of thumb in Downing Street is that once e-petitions attract over 100,000 signatures, the issue is considered for debate in parliament.

It is not an automatic right, however, and the government has steadfastly refused to back down from, or elaborate on, its decision to award the franchise to FirstGroup.

Transport secretary Justine Greening insisted throughout most of yesterday that there would be no rethink and the formal signing of the contract was due to go ahead in the early hours of today.

Branson, who is currently on his private Necker Island in the British Virgin Islands, says he had no choice but to call in the lawyers. Furious that the deal is being rushed through without proper risk-assessment – and comparisons have been made with G4S’s disastrous Olympics contract – Branson insists his offer is “more deliverable and a lower risk”.

He is adamant that his rival’s figures cannot be made to add up and will bankrupt the line, which carries some 31 million passengers a year.

While FirstGroup’s offer is in the region of £5.5 billion against Virgin’s £4.8 billion, FirstGroup’s payments are stacked towards the tail end of the contract.

With a break fee of just £235 million, it would be relatively cheap for FirstGroup to walk away towards the end of the franchise term, when the payments become more onerous, just as National Express did on its East Coast franchise a few years ago.

Armed with 400 pages of legal argument, Virgin has now gone to the High Court in an 11th-hour attempt to have the bidding process declared flawed. Its lawyers are understood to have rooted out a clause in the bidding documents that says the department for transport should not sign over control of the franchise in the event of a legal challenge.

It is a very public mess for one of the government’s flagship contracts. It is not clear at this stage whether Virgin’s legal challenge will ultimately succeed, although it will, in the short term, delay the formal signing of the contract. For the government, Greening pledged to “defend our position and the robustness of the process as well”.

Win or lose, the bearded entrepreneur has another ace up his sleeve, however. Just days after losing the West Coast franchise, another part of the Virgin empire announced plans for its first domestic air service – £95 return flights from London to Manchester.

The journey will take an hour, compared with two hours on the West Coast rail service, and will be about a third of the cost.


Fiona Walsh writes for the Guardian newspaper in London

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