Britain says Virgin Rail to keep running West Coast

LONDON (Reuters) - The British government said it agreed a deal with incumbent operator Virgin Rail to run the country's key West Coast rail service, giving itself up to 23 months to sign a new long-term contract after a botched earlier attempt.

A 13-year franchise deal, due to commence in December, had originally been granted to FirstGroup ahead of Virgin Rail, but the government was forced to pull the award earlier this month when it discovered serious flaws in the way it had run the process.

The new deal signed with Virgin Rail for up to 23 months exceeds guidance given by the government in October, when it said that it expected Virgin to remain operator of the line for 9 to 13 months.

The existing franchise agreement between the government and Virgin Rail, a joint venture between Richard Branson's Virgin Group and Scotland-based transport firm Stagecoach, was due to expire on Sunday.

Virgin Rail's new agreement may be terminated early if a long-term West Coast franchise is ready to begin before November 8 2014, Stagecoach said, adding that the joint venture will bid again for the long-term franchise when it its re-tendered.

Under the 23-month deal, the government will bear revenue and cost risk with Virgin Rail receiving a margin of 1 percent on revenue.

"Our agreement gives value for money to taxpayers and an appropriate return to the shareholders whose private investment underpins Britain's rail system," said Stagecoach finance director Martin Griffiths.

(Reporting by Sarah Young; Editing by Paul Sandle)

Source: http://news.yahoo.com/britain-says-virgin-rail-keep-running-west-coast-082119144--finance.html

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