East Coast rail operator in Peterborough makes a loss
Bosses of rail operator Virgin Trains East Coast have revealed the business is making a loss.
They warn the company, which operates main line services between London, Peterborough and the north, is not expected to make a profit until 2019.
Bosses say a difficult economy, political uncertainty and terrorism have hit train use nationally.
Now the firm’s major shareholder, Stagecoach, has started discussions with the Department for Transport to secure changes to the current Virgin Trains East Coast franchise.
The success of the talks is likely to be key to securing future growth for Virgin Trains East Coast.
The rail operator’s plight was raised after the Stagecoach Group issued its results for the 2016-17 financial year.
Stagecoach has been forced to take an £84.1 million charge for the losses it expects to suffer in the next two years on the East Coast franchise.
David Horne, managing director of Virgin Trains East Coast, said: “Virgin Trains East Coast has performed better than the UK rail average, and is meeting all of its financial commitments to government but the growth we are seeing has not been at the level to cover current costs.
“While that’s disappointing, it’s business as usual for us in working with our suppliers, partners and other stakeholders to transform services on the East Coast route and deliver great value, high quality services to our customers.”
The company says the tough economy, political uncertainty and recent terrorism incidents have had an impact on travel in the UK, including on the level of train use across the country.
Mr Horne said: “Stagecoach is making financial provisions to manage this short-term situation and I am pleased to say that the business is expected to return to profit from 2019.
“In addition, we are engaged in discussions with the government about updating our contract to reflect the changes to Network Rail’s infrastructure plans.
“This is because our plans for a new timetable providing more, faster, direct services – originally planned from 2019 – depend on these infrastructure enhancements.”
Virgin Trains East Coast and Stagecoach jointly secured the £3.3 billion contract to run the East Coast services two years ago.
Mr Horne said: “Over the past two years, the team at Virgin Trains East Coast has delivered a huge transformation in the travel experience for our customers.
“This has been driven by great people, a multi-million-pound investment programme and strong relationships with our business partners.
“Earlier this month, our achievements were recognised when we were named the best public transport operator at the Scottish Transport Awards.
“We’ve achieved our best customer satisfaction figures, amongst the highest of any UK rail operator, as well as providing a 30 per cent increase in the money our franchise generates for the taxpayer.
“Already this year we have introduced half-hourly services between Leeds and London on Saturdays, making a further 115,000 seats available for £16 each way. And in 2018 our new fleet of Virgin Azuma trains will start to enter service heralding a new era of express travel on the East Coast route.
“We look forward to continuing to work with you on delivering our vision to transform rail services on the East Coast and our continuing investment.”
Stagecoach chief executive Martin Griffiths said: “We are disappointed to report losses at Virgin Trains East Coast.
“However, I am confident that we can return the business to profitability and build on the significant benefits we have delivered to date for customers and taxpayers.”