Virgin Trains will retain the West Coast franchise until April 2017.
It has been given a Direct Award, which came into effect on June 22, three days after it was formally announced by the Department for Transport.
Under the new deal VT expects to be able to run new routes by December 2014. The DfT has the option to extend the deal by an additional year should it wish to, meaning that the franchise could run until March 2018 - 21 years after it was first awarded.
Taxpayers should be guaranteed a payment of £430 million (equating to £155.3m per year), provided the economy performs in line with expectations. This money will go to the government, a rise of at least 58% on the current arrangement. In the management contract from December 2012 to June 21 2014, VT paid £150.9m (£98.1m per year).
It has agreed with the DfT plans for new direct services between Shrewsbury/Blackpool and London, with a joint submission due to be made to the Office of Rail Regulation shortly.
VT is also to convert Coach G of all 21 of its nine-car Class 390 Pendolinos that were not previously lengthened with an additional Standard Class coach into extra Standard accommodation. This will boost overall Standard capacity by an additional 5,500 seats per day - a net increase of 2,100 seats.
The company will also spend £2.5m to improve the interiors of its Pendolino train fleet, and £2.75m on improving catering facilities.
A new super-fast, free to all customers WiFi system will also be fitted to every one of VT’s 76 Pendolino and Super Voyager trains, supported by trackside infrastructure supplied by Network Rail. The development will feature what VT claims is the first major intercity deployment of 4G technology on the UK rail network.
This was confirmed nearly two years after the WC franchise fiasco that saw Virgin Trains lose the franchise to FirstGroup (RAIL 703), only for the award to then be cancelled after major flaws in the competition at the Department for Transport surfaced (RAIL 707).
“This deal will provide thousands more seats and better journeys for the tens of thousands of passengers who use these services every day,” said Secretary of State for Transport Patrick McLoughlin.
“The West Coast provides a vital artery between London and Scotland, and it is crucial we do everything we can to improve services on this much-used route.
“This is further proof of our commitment to get the best deal for passengers and taxpayers, with Virgin set to pay more than £430m to run the franchise. It’s all part of our long-term economic plan to drive forward our economy, and provide better services now and great services with HS2.”
Virgin Trains Executive Co-Chairman Patrick McCall said the company was “delighted to have reached a deal after some tough negotiations with the DfT”, adding: “It puts the problems of 2012 firmly behind us, and shows the clear benefits of a well-run franchise system.
McCall’s colleague on the Stagecoach side of the business (the company owns 49% of VT), Executive Co-Chairman Martin Griffiths said: “With commercial train operators taking on the cost of investing in new services, the passenger experience can be improved without public money being put at risk,” he said.
“As the improved passenger experience then encourages greater train travel, taxpayers benefit a second time with more money flowing to the Treasury.”