Stagecoach and Virgin win East Coast inter-city rail franchise

Stagecoach Group's 90%-owned joint venture with Virgin Rail has won the contract from the Department for Transport (DfT) to run the new InterCity East Coast franchise for eight years from March 2015.

The franchise contract requires the pair's Inter City Railways joint venture to commit to paying the government £2.3bn in premium payments, which the companies said would be a higher return to the taxpayer than under the current arrangements.

As part of the contract, which has the option for a one-year extension at the DfT's discretion, the companies will acquire the current East Coast Main Line operating company from the government for a cash consideration of around £11m in March.

East Coast Main Line made a £9.5m profit before tax in the year to March this year.

Stagecoach and Virgin beat off several other train operating rivals bidding for the franchise, including FirstGroup and a joint venture between Eurostar and France's Keolis.

The deal has seen the venture agree to £140m of investment in improving the service, including 65 new 'Super Express' trains from 2018, cutting journey times, extra services to London from key locations in Scotland and England, and a 50% increase in capacity by 2020 via the addition of 12,200 further seats.

Trains will be branded 'Virgin Trains East Coast' as part of an early multi-million-pound train refresh programme for the existing fleet of rail stock.

Winning the franchise