The familiar red trains that have been running on the West Coast main line for more than 20 years will be gone in less than a year.
The train operator is owned by Sir Richard Branson’s Virgin Group and Stagecoach Group.
Since Virgin Trains took over in 1997, the rail service has been transformed, with faster and far more frequent services. The number of passengers has more than doubled.
Virgin Trains had bid to continue with the new West Coast Partnership franchise from March 2020, with SNCF of France as an additional partner.
But the Department for Transport (DfT) said the Virgin Trains bid was “non-compliant” in respect of pension provisions and had, therefore, been rejected.
The news was revealed by Stagecoach, which owns 49 per cent of Virgin Trains – and had also bid for the East Midlands and South Eastern franchises.
Stagecoach said: “A senior DfT official has verbally informed Stagecoach that it has been excluded from all three competitions for submitting non-compliant bids principally in respect of pensions risk.”
A DfT spokesperson told The Independent: “Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. It is regrettable that they submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.
“We have total confidence in our process. We have awarded the East Midlands franchise to Abellio after they presented a strong, compliant bid.
“It is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”
The row centres on the extent to which train operators should be responsible for meeting the requirements of the Pensions Regulator.
With significant numbers of staff employed on final-salary pension schemes that go back to the days of British Rail, train firms are concerned that they could be exposed to financial risks beyond their control.
Martin Griffiths, Stagecoach Group’s chief executive, said: “We are extremely concerned at both the DfT’s decision and its timing. The department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.
“We bid consistent with industry guidance issued by the Rail Delivery Group and shared with the DfT.
“Forcing rail companies to take these [pension] risks could lead to the failure of more rail franchises and cannot be in the best long-term interests of either customers, employees, taxpayers or the investors the railway needs for it to prosper.
“Over more than 20 years, we have delivered industry-leading performance, record passenger growth, excellent industrial relations and the highest levels of customer satisfaction in the sector. We will continue to focus on delivering high-quality services for our customers at our existing rail businesses.”
A Virgin Trains spokesperson said: “We’re very disappointed by the DfT’s unexpected decision. We’ve led the industry for more than 20 years with our groundbreaking innovations, such as automatic delay repay, and award-winning customer service.”
No passengers will be affected by the dispute while the Virgin Trains franchise continues. The next franchisee will run services that are broadly similar to today.
Stagecoach Group shares fell briefly by 10 per cent but are now trading at 2.5 per cent below Tuesday’s closing price.
Virgin Trains East Coast, 90 per cent owned by Stagecoach, handed back the franchise from London to Yorkshire, Newcastle and Scotland in 2018 after losing £200m in three years.