Stagecoach has refused to accept pension risks that could have been “well in excess of £1bn” from the three franchise bids they were disqualified from.
In April the government banned Stagecoach from competing for three rail franchises, over a row about pensions.
The train and bus operator were verbally informed by the Department for Transport (DfT), that they are now disqualified from the UK franchise competitions over, South Eastern, West Coast and East Midlands.
Rail companies are facing an estimated £7.5bn pension gap and Stagecoach said under one scenario they could have been left £1.6bn of liabilities as protection from the DfT are not good enough.
Stagecoach said there is an “absence of any contractual protection” for rail franchisees over unknown pensions liabilities.
“As yet, there has been no final determination by the [Railways Pensions Scheme] trustees or the Pensions Regulator of the extent of the liability that would be borne by franchisees.
“While ultimately the Department for Transport provided limited protection against the risk in the specification for the three current franchise competitions, our assessment was it still left the successful operators with substantial risk which could not be assessed.”
The Pensions Regulator said, “We are working closely with the scheme trustees, Rail Delivery Group and the Department for Transport to ensure the best possible outcome for pension scheme members.
“Part of this work is to ensure the scheme is adequately funded so that members receive the benefits they expect.”
Speaking at the time, Sir Richard said he was “devasted” by the disqualification, Stagecoach own 49% of Virgin trains.
Writing on his blog site, Sir Richard said Virgin Trains “could be gone from the UK in November.
“We’re baffled why the DfT did not tell us that we would be disqualified or even discuss the issue, they have known about this qualification in our bid on pensions for months.
“The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions.
“We can’t accept a risk we can’t manage, this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.”