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Friday 06 August, 2004

Strategic Rail Auth

Virgin CrossCountry franchise

Strategic Rail Authority
06 August 2004

                                                                   6 August 2004

                   Statement on Virgin CrossCountry franchise

The Strategic Rail Authority (SRA) today announced that it had not received an
acceptable offer from Virgin Rail Group (VRG) in the renegotiation of the
CrossCountry rail franchise.

A Best and Final Offer for a single-tender deal running to 2012 was recently
received from VRG, but was significantly too high to pass the value for money
test that the SRA undertakes on behalf of taxpayers.  As a consequence, the SRA
informed VRG this afternoon that it is ending negotiations on the CrossCountry

The SRA's rights, which are designed to protect the interests of both passengers
and taxpayers, are contained in a 'Letter Agreement' signed between the two
parties in July 2002.  This gives the SRA the right to terminate the franchise
should it be unable to reach agreement on a long-term deal.

The SRA has informed VRG that it reserves its right to terminate the franchise,
and that it will inform VRG of how it intends to take matters forward on the
franchise in the near future.  In the meantime, the annual budgeting process
will continue on the franchise.

Services on CrossCountry are unaffected.

Notes to Editors
 1. VRG continues to operate the CrossCountry franchise under a 'Letter
    Agreement' between the SRA and VRG that has been in place since July 2002,
    and which supplements elements of the franchise agreement which commenced in
    1997.  The agreement provides for an annual budget for the franchise to be
    agreed between the SRA and VRG or, if necessary, determined by the SRA, in
    order that VRG receives no more money than is necessary to operate the
    services under a defined profit margin.

 2. VRG also operates the West Coast franchise under the Letter Agreement.

 3. VRG is a joint venture between the Virgin group of companies (51%) and
    Stagecoach Group plc (49%).

 4. This decision has been made on value for money grounds and is not a
    reflection on the progress that Virgin CrossCountry has made in terms of
    performance, as evidenced by the latest National Passenger Survey in which
    CrossCountry was rated the top performing long distance train operator.

        For further details contact the SRA Press Office: 020 7654 6339

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