Rail 703: Branson’s long goodbye

So it’s a long goodbye for Richard Branson from the railways. When the West Coast franchise is handed over to FirstGroup in December, it will be the end of Virgin railway venture since the company already lost CrossCountry five years ago.  The bearded one will never have the chance again to stand in front of a new train set arms akimbo in a fog of dry ice vapour between two young ladies not chosen for their intellectual capabilities.

I somewhat suspect it is a relief for both sides (the railways and Branson, not necessarily the starlets) . Branson’s – or rather Virgin’s, since he has little to do with the day to day business – record has been uneven  at best and at worst resulted in some awful publicity for the so called hippy entrepreneur who, behind the hair and the ghastly grin, is, in fact, just another hardnosed businessman. The rail industry, on the other hand, has been embarrassed by his antics and was rather wary of the Virgin brand. And nothing irritated the rolling stock companies more than Branson’s claim that he had invested in new trains when he had, fact, merely leased them. Nor could he claim the trains were brought in at his initiative. Any winning franchisee would have had to obtain new trains as it was part of the franchise requirement.

Indeed, Branson and trains were a poor fit. The railways are not an airline. Virgin Atlantic was created at a time when the airlines saw themselves more as BOAC than Easyjet, a glamorous form of travel where customers (oh yes, not passengers) were treated like precious jewels and champagne and caviar rather than plastic sandwiches were the order of the day. Branson wanted to translate that atmosphere to the railways but that was to misunderstand the difference between the two. Railways are a much more mundane business where the skill is to do precisely the same job day after day and be as unobtrusive as possible – not something Branson found very interesting. Innovations take time to introduce as there are a whole host of other stakeholders involved.

I remember his first attempts to get into the industry during the privatisation process when his go-getting attitude came up against the harsh realities of the railways. He talked about non-stop trains to Edinburgh which would knock an hour off the existing timetable, failing to understand that there are problems of overtaking and scheduling on a two track railway and that, in any case, much of the market is for intermediate stops. Nor did he understand that the open access arrangements were likely to be highly constrained as they would abstract revenue from the franchises and make them more expensive for the government. In fairness, the drafters of the privatisation legislation had not really understood that point themselves.

Branson himself was very engaged during the early days of trying to get into the rail industry. He even once rang me personally at 8 30am in the morning to berate me for a critical story about Virgin I had written on the front page of The Independent that day. By then the focus had changed to franchising rather than open access and Virgin soon found itself as the winning bidder for two franchises. West Coast and CrossCountry.

At this point Branson made a bad mistake which, for a while, severely damaged his brand. The 15 year West Coast contract came, necessarily, with a commitment to lease new trains but Branson, eager to establish Virgin’s name, rebranded the existing fleet. The massive West Coast route modernisation programme had also been planned, with the aim of greatly improving reliability and capacity on the line.

However rather than wait for these improvements before promoting the Virgin brand, all the trains were rebranded in the now familiar red livery. Customers, therefore, therefore directed their anger, somewhat unfairly, for the poor service at Virgin and indeed Branson personally. Virgin had significant input into the design of the Pendolino, and some features proved a mistake. Technically they are undoubtedly great performers, but the insides are cramped which Virgin says is a result of the need for tilt, but this is a matter of some dispute among engineers.

There were other mistakes. The toilets have been a disaster and a wiser company might have thrown millions at sorting the mess out. Instead, Virgin has been in denial about the problem. Yet they continue to stink despite claims that the problem has been fixed. Also, there was the wrong balance between the classes on the trains, with four first class and five standard – now being extended to seven. Of course Virgin was not to know that MPs and the Civil Service would be forced to downgrade, vacating vast swathes of first class but even so the emphasis on first was a misreading of the market. The food, too, has been poor with the exception of the brilliant breakfasts. Again, though, in mitigation, people now have an array of food counters to choose from at the major stations which Virgin mostly serves. And the tilt does make me feel rather sick, especially north of Rugby, but that’s a personal weakness (generally I don’t get travel sick, so very odd). The mistake, really, was allowing a train operator with a limited franchise to specify the train. I know IEP, specified by the Department is even more of a disaster, but this again raises the point about the need for franchising, but we won’t go there.

Nevertheless, the Pendolino is generally thought to be a good train and people like them. The service is reasonable though nothing special and I have experienced more examples of staff going the extra mile than the opposite (with the exception being one particularly unpleasant scouser charging me £200 quite unnecessarily which I got back anyway). On the whole, though I could not fault the staff who may well have cause to regret the transfer away from Virgin. Fortunately, too, the choice of managers was often spot on and that ensured the service was run by experienced operators – with the odd exception, no names, no pack drill – who knew what they were doing.

The timetable that Virgin delivered by one of those experienced operators, Chris Green, cannot be faulted. The frequency of trains linking the major cities is better than at any time in the history of the railways but the company never had the courage to address the fundamental contradiction between providing such frequent level of of service that it was not necessary to look up a timetable, and yet make it so impossibly expensive to travel a lot of the time without booking in advance. Sorting out that conundrum, perhaps through having standby tickets or frequent passenger discounts was is the sort of innovation which would have been more useful than the dry ice shows favoured by the bearded one.

To sum up, I would give Virgin 6 out of 10, which would have been higher had Virgin not raised expectations about transforming the railways. Overall, Branson’s brash style grated. I don’t buy the argument that the industry needs characters like him. It needs people like Chris Garnett or Bob Breakwell formerly of First Great Eastern who know how to run a railway. Branson’s biggest failing, though, was that he never has really understood the harsh world of politics – remember the ‘bag it and bin it’ campaign he did with Mrs Thatcher second in embarrassment only to John Major’s infamous cones hot line? He showed his naivety and intemperate nature by writing an angry letter about losing the franchise and then being daft enough to leak it. He really thought that he could change ministers’ minds just on the basis that he is ‘a nice guy’. That echoed his serial failures at getting the lottery.

The key issue, though, is whether FirstGroup (for it is they) will do any better. The company has a mixed record. On some franchises, it has earned a reputation for excellence, on others it has been widely criticised. The best benchmark is Great Western which perfectly reflects the company’s patchy performance. One of the worst aspects of the FGW franchise has been the ghastly refurbishment of the HST trains, with the removal of most tables, the installation of lights of an intensity that CIA torturers would baulk at (although they have been partly dimmed) and ghastly high backed seats. There have been difficult periods, such as the overcrowding in the Bristol area five years ago caused by the withdrawal of stock but performance has undoubtedly improved since first under Andrew Haines and now with Mark Hopwood’s leadership. There is too a different style right at the top with Tim O’Toole, the engaging American who ran London Underground, now chief executive of FirstGroup. If one had to sum up its reputation, it would be plain vanilla, which is not necessarily a bad attribute in the railways.

However, the most telling point, however, is that First Great Western financially has been a basket case. The company overbid, did not take up its option for the last three years of the franchise and has been in cap and collar arrangements ever since the 2008 financial crisis. Of course, it was bad luck as the firm could not have predicted the recession, but is now basing its bid, again, on an overoptimistic assessment of the transport market.

The early leaks of the franchise figures suggest that there will be mass shedding of staff and the need for heroic rates of growth. I’m going to stick my neck out here – despite these times of austerity, despite past mistakes by the Department for Transport, despite all the ridiculous franchise deals, and despite First’s mixed reputation, I don’t think ministers will have signed off on a deal that is patently unrealistic. But I could be wrong.

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