Virgin Trains Gets Derailed in Loss of Government Franchise

The famously flamboyant Richard Branson was less than his jovial self in a letter to colleagues last week announcing that Virgin Trains had lost the UK's West Coast rail franchise it had operated since 1997. 

"I can hardly express my disappointment and frustration over the Government decision that means we will not be able to run the West Coast rail service after December," wrote Branson. "We did everything possible to put together a strong, deliverable bid and I know it would have brought fantastic benefits for customers, staff and taxpayers. But in the end the decision rests with Government and we have to respect that, however much we disagree with the process behind it."

Virgin Trains' bid to continue to operate the rail service was rejected in favor of a bid said to be considerably higher made by FirstGroup, the UK's largest rail operator. "But there are concerns that FirstGroup may have bid too much for the franchise," according to BBC News. Branson agreed with that assessment, writing on his blog, "We also did not want to risk letting everybody down with almost certain bankruptcy at some time during the franchise as happened to GNER and National Express who overbid on the East Coast mainline." He added, "Under our stewardship, the West Coast Mainline has been transformed from a public liability into a valuable asset for the UK, worth many billions of pounds. The service is a British success story and one to put up against rail companies around the world."

The setback is rare for Virgin's transportation businesses, which have buoyed Branson's burgeoning empire. In fact, it is an interesting juxtaposition of what happened subsequent to Virgin's launch of Virgin Atlantic in 1984. The fledgling airline faced a withering attack from their larger rival, British Airways, that lasted a decade. A libel suit brought by Branson in 1993 resulted in a public apology from British Airways. Hostilities haven't ended to this day, however. Just recently, Branson had some biting comments about the British Airways takeover of a smaller airline, bmi, suggesting the acquisition will "cut consumer choice and screw the travelling public."

Now Branson finds his Virgin Trains brand on the other side of a losing battle with a larger rival. To add insult to injury, on Monday, a Virgin Train derailed, wreaking havoc for rail commuters coming into London.

Still, Richard Branson has managed to rise above adversity most every time he has faced it, whether during one of his failed balloon flights or on the corporate scene. The Virgin family of brands continues to be revered by customers. While Virgin Trains may have taken a hit, Branson will surely keep looking ahead -- and looking back too: Virgin may be on the verge of returning to its origins by buying back Branson's beloved Virgin Records.