Business Stripped Bare Page 12

  I also noted that the duty-free trolley was going up and down the aisles without making any sales. I looked at the in-flight service report. Sure enough: no sales. Something had to be done either to encourage the passengers or to improve the sales opportunities (more likely, both), or get rid of the trolley altogether and save the weight.

  But what's most revealing now – and most useful to you if you really are reading this for business lessons – is this note: 'Staff desperate for someone to listen.'

  Under this I jotted down an idea: 'Make sure flight staff reports are actioned IMMEDIATELY,' and I'm pleased to say that they now are, and onboard staff get the action and feedback they need.

  When we launched our routes to Japan, I knew that we needed Virgin Atlantic to pay particular attention to cultural differences and to the Japanese sense of respect and formality, without spoiling our offering. It's a fine balancing act. On the inaugural flight I added some more thoughts: 'Need slippers in Upper Class, not socks. Need Japanese beers. Only one kind of newspaper from London: English. Need Japanese too. Japanese tea from London, not good. Japanese food from London. Tastes good but must be better presented. Looks like fish and chips. Saucers for Japanese teacups.'

  I think company owners and chairmen should get out from behind their desks and go and sample their own products as often as possible. I do see many bosses doing their rounds speaking to staff, but they never write the details down. They will never, ever get anything sorted. And month by month, year by year, they will suffer the consequences.

  *

  Imagine trying to do a good job in the teeth of official opposition. Imagine being told constantly to cut corners. Imagine being rewarded for good delivery by having your business taken away from you and redistributed. Imagine winning market share and then being prevented from delivering more of your product.

  In short, imagine the British government's railway regulatory system!

  Communication and attention to detail can make your business run more smoothly, but saying this doesn't nearly convey their importance. As I think you'll see from the following account, good communications and attention to detail were what enabled us to do business at all, in what has to be one of the toughest sectors we've ever entered.

  In January 1997, when we took over the first of our two railway franchises, we made a public promise to usher in new trains and lead a 'red revolution' for the travelling public – on the busiest train lines in Europe. It was my personal commitment to deliver on this. It has taken some time. Eventually, we were voted the UK's best train company in January 2008 by the Institute of Customer Service. This, in my opinion, was rather overdue, but gratefully received, nonetheless! Virgin Trains also topped the 'Passenger Focus' National Passenger Survey with a score of 86 per cent for customer satisfaction. And Travel Week, a trade magazine, declared Virgin Trains the best railway company, as voted for by the travel trade and travel agents. This string of tributes is principally down to all the Virgin Trains people who work day in, day out, often in fairly arduous conditions. It's also a great accolade for Tony Collins, the CEO of Virgin Trains, who has been a champion for the customer and staff, but a pragmatist about how difficult it is to run a railway.

  I'm the kind of person – as most people will know from my ballooning escapades – who is willing to stick my neck out and take risks. When we launched the West Coast Main Line franchise on 9 March 1997, we said we would replace the whole fleet, and improve services and connections. We also promised new diesel Voyager trains on the CrossCountry networks which criss-crossed Britain. But it would take a number of years before we could deliver this. We had inherited the worst part of the system and to start with we had to make do with a lot of 40-year-old rolling stock and clapped-out engines inherited from British Rail. Some of the rolling stock was in a terrible state. My first action as proud owner of a new railway set was to sign a £10 million cheque so that we could get some spare parts to run the trains.

  We steam-cleaned them, painted them and tarted them up as best we could. More than that, we kept them running, while promising our passengers a better service in future. It took time and a lot of pain and disruption. And we got a great deal of abuse from people who still didn't like the idea of the railways being deregulated and privatised after half a century of nationalisation.

  The 401 miles of the West Coast Main Line from London Euston to Glasgow is one of the world's great railway journeys. As it heads north, the constant twists and turns of its gentle bends make it difficult for a train driver to build up a decent speed. Only tilting trains can counteract the terrain. It's really a misnomer to call it the West Coast Main Line because it touches the coastline only once, briefly, at a small strand near Morecambe Bay. It is an inland route, taking in concrete-encased Birmingham with its landscape of canals, factories and occasional dereliction, busy Midlands towns such as Crewe and Wolverhampton, and Border Uplands. In the 1920s, the opulent steam trains chugged out of King's Cross and Euston at 10 a.m. each day to race to the north. Virgin Trains was ambitious enough to try to re-create some of that lost glamour for the twenty-first century.

  We felt we could transform Britain's rail network from the worst in Europe to one of the best. But for the Virgin brand not to be too damaged in the process, we would have to bring the public along with us. Innovation had to be the difference for Virgin Rail.

  For the first few months of our franchise we examined all the technological possibilities. In May 1998 I flew out to Italy from London City airport to the Fiat Ferroviaria site in Turin, which is the train-making arm of Italy's largest private conglomerate. I saw the kind of stylish, well-constructed trains that we needed on the UK's dilapidated system. The innovation of tilting trains was explained to me, along with the complex relationship between tilt, speed and stability. Next day the journey from Turin to Rome was my first on a tilting Pendolino ETR 460. It was fast and smooth as it hit 150mph through the Piedmont countryside. When we returned from that trip I sat down with Will Whitehorn and the rest of the Virgin Trains team. I was wildly impressed, but I kept my head. I said: 'I want these trains to be the best there are – and the safest. I'd like us to look at what's available across Europe and elsewhere.'

  As it turned out, I was right to be impressed: the Pendolino proved to be the best electric train anywhere, bar none. Its tilting system allows a skilled driver to control the train at speed with a huge element of safety. The trains can tilt by eight degrees on rail bends – you'll notice it, but it won't spill your coffee. An automatic warning system rings a bell in the driver's cab as he passes each trackside transponder. This sends a message to the driver saying it's safe to tilt, allowing him to increase the train speed from 85mph to 110mph. On straight stretches the permissible speed is 125mph – soon to be 135mph, and we built the trains to be capable of over 140mph, ready for the future if the track is further improved. It is the driver who has the feel of the train and learns its limits – but if the driver ignores any warnings the computer automatically applies the brakes.

  We signed a deal worth £1.85 billion – at that time, my greatest ever financial gamble. The bogies of Fiat's Pendolinos would be adapted in Birmingham by GEC-Alsthom for Britain's narrower-gauge railway lines. (Alstom – the merged company dropped the 'h' – took over Fiat's train-making in 2002.)

  Stagecoach transport group chairman Brian Souter is one of the UK's leading business figures and a 'transport entrepreneur' through to the bone. He and his sister, Ann Gloag, are a formidable pair: they started out in the bus and coach wars after deregulation before moving into trains. From their base in Perth – with Ann selling the tickets and cleaning the buses, and Brian driving some of the routes, they have transformed the company into one of the UK's corporate success stories. The business was sidetracked when it tried to expand into the United States by buying Coach USA, but through their own determination and drive, Stagecoach bounced back from this setback. As I write this in 2008, Stagecoach is one of the UK's most successful transport
companies and Brian is still in the driving seat.

  When it was announced I was thinking of a flotation for Virgin Trains, Brian rang me up and said: 'I share your vision for the railway system.' And nine days later we'd done a deal. Stagecoach held 49 per cent of Virgin Trains to couple with its South West Trains, the UK's largest commuter network, and the Isle of Wight's Island Line, a mini-railway company. I admired that kind of decisive action and it cemented a friendship and working relationship that has lasted over a decade. At a time when transport – and railways in particular – was never out of the headlines, we wanted to make a positive statement after years of expectation. It was all about creating a feel-good news event to assure the frazzled travelling public that something was indeed being done.

  Brian shared our view that innovation – leading to a better experience – was the best way to encourage more people to go by train. And while he admitted to having reservations about the Pendolino, he said: 'My mother used to say to me that a fool and a bairn should never see a job half done. I think when people eventually see what's being created here they will understand we're really doing our best to improve the railway system.'

  In 2003 the Christmas panto season came early. On 4 December I arrived at one of Alstom's vast Birmingham workshops to deliver a massive present.

  I was dressed as Santa Claus and sat next to two scantily clad women on a tinsel-bedecked trap pulled by a reindeer. Brian, wearing a Glenalmond school blazer, shorts, an old-fashioned leather satchel over his shoulder and with a blue cap worn at a jaunty angle, was the lucky schoolboy unwrapping his giant train set.

  Faced with a gallery of UK media, I called out to Brian asking if he had been a good boy and what did he want for Christmas. 'Some nice, shiny, new trains which go very fast, please.'

  I couldn't resist a quip in front of the TV cameras: 'And how about a higher share price?' (The Stagecoach share price was in the doldrums since its mega bus deal with Coach USA. Brian and I have both been through the mill together, so I can get away with jokes like that.)

  As the dry ice swirled around, amid sparkling fireworks and the booming strains of the Mission: Impossible theme tune, the nose of a new train burst through the satin wrapping. Nationalised British Rail never generated this much excitement. And although it was only the shell of the first Pendolino, shipped from Italy to Bristol and then Birmingham, we were a step nearer.

  Virgin West Coast invested £1.2 billion in fifty-three Pendolinos. Each train cost £11.5 million – which we were told by government railway officials was £1.5 million too expensive. The extra safety features I had asked for had increased the price. Passenger numbers began to rise – although they stumbled at times after engineering setbacks on the tracks.

  Angel Trains, then a subsidiary of the Royal Bank of Scotland, stepped in to become the train owners; they then leased the rolling stock the way planes have been leased to airlines for many decades. It's a lucrative business because Angel Trains was sold in June 2008 to a consortium led by Babcock & Brown, an Australian infrastructure business, that includes Deutsche Bank and AMP Capital, for £3.6 billion. The train-building work was also a massive boost for Birmingham and kept highly skilled engineering jobs in this industrial heartland.

  The new trains give off 76 per cent less carbon dioxide per seat than domestic airlines and are the most emissions-efficient rolling stock in Europe. They're very reliable. They spend less time in the workshop, more time carrying passengers. Every time the train slows down, the brakes heat up and the regenerative braking system pumps electricity back into the overhead cables – another innovative feature that government transport officials didn't want. With oil at $48 a barrel, they didn't see the point in putting electricity back in the grid. By 2008, with oil prices nearing $150 a barrel, perhaps it's clear even to them that it was a good decision.

  The new trains went into service along the West Coast Main Line on Monday 27 September 2004. And on the first day there was a glitch. One that (Sod's Law being what it is) coincided with the announcement in London of Virgin Galactic, the world's first commercial space launch system for both scientific and human space flight. The Royal Scot train leaving Glasgow ground to a halt outside Carlisle. Passengers had to be switched to another train and were two hours late arriving in London. The press put the breakdown and Virgin Galactic stories together and the Daily Mail had full-page fun at our expense: 'Euston, we have a problem . . .' It was an absolutely brilliant headline and it put me in an irritable mood all day.

  If I needed comfort, though, I only had to look at the situation by the end of the first week. The news was very encouraging: I wrote in my notebook:

  'First week – Pendolinos. 27 September–2 October. 82 per cent punctuality. Promised 72 per cent. Cancellations 4 out of 210 trains run daily. Pendolino tilting in traffic 32, two more than estimated on Monday 27th. Only two trains to fail. Got masses publicity due to space launch. Jack Straw travelled and said PM enjoyed reception – also that he'd had amazing feedback from our staff parties.'

  To this I added: 'Delivered exactly what we promised a year ago and general mood of passengers is that it worked well and will steadily improve.'

  In the early days, mind you, we had to weather constant criticism about Virgin's two franchises. Virgin Trains had to take over the worst record for timekeeping in the country. Our West Coast Main Line services achieved a punctuality figure of only 84 per cent in the year to 16 October 1999. And the performance of Virgin CrossCountry, a higgledy-piggledy criss-crossing of routes, was worse, recording a figure of 80 per cent. But this was unfair on our team. We were now operating more services and carrying more passengers on the antiquated track and rolling stock which we had to nurse along until the new trains arrived.

  I felt for all of our people. It was demoralising to be constantly criticised. We had worked very hard to get things better and the service had improved. The privatisation of the network brought some real benefits, but it imposed an institutional and political structure that was seriously flawed from the beginning, something which was exposed by the Hatfield accident, after a broken rail went undetected.

  The Hatfield rail crash, on 17 October 2000, left four people dead and seventy injured. It was a nadir for the rail industry, and some questioned whether it would ever recover. Railtrack slapped speed restrictions on the whole of the rail network and our passengers suffered misery, delays, late arrivals and cancellations. There were recriminations and blame. I remember long discussions with Stephen Byers, then Secretary of State for Transport, about what needed to be done. Privately I wondered if it would ever be properly sorted. In 2001, following Hatfield, Railtrack, a publicly listed company, went into administration, and the company's shareholders lost their investments. In 2002, the Rail Regulator presented taxpayers with a massive bill for an additional £1.25 billion a year of increased infrastructure costs, largely due to historic underinvestment and Railtrack's loss of control. It was a deep and complex mess.

  Since Hatfield, however, the rail industry has slowly begun to turn the corner. The UK government established Network Rail as a not-for-dividend private company to manage the railway infrastructure – that is, the track and the signalling. These changes were implemented in the Railways Act 2005, with the Secretary of State for Transport now responsible for setting the strategy and budget for the railways in England and Wales.

  Increasingly, Virgin Rail has developed better partnerships with the government, Network Rail, and suppliers like Alstom and Bombardier, to bring in huge improvements. We've got our trains running every twenty minutes between Manchester and London – the highest frequency for that sort of route anywhere in the world. For business people, trains are now a much better alternative to short-haul flying. Virgin's own delivery has improved, too. In 1997, 13.6 million passengers used the West Coast Main Line. In 2003, this was 14.1 million; 2004, it was 15.1 million; 2005, 18.7 million, and by 2007, it was more than 20 million. Our punctuality was over 90 per cent. What had seemed like
Mission Impossible became more than doable. It became surpassable. Network Rail still have big issues to deal with in the way they upgrade the last sections of track and inconvenience the public. But one way or another, 2009 will see another leap in service, speed and punctuality on the West Coast line, which will make it truly a world-class railway. It has been a tough journey but thanks to the leadership of Tony Collins and the support of Stagecoach's top management we have made it through the really tough times.

  You must never forget that every change ushers in unforeseen consequences. This applies as much to welcome changes as unwelcome ones. It always tickles me when a spokesperson comes on the television to explain, with an earnest frown, that an ailing company is 'a victim of its own success' – as though it had undergone something rare and freakish and hard-to-credit; some sort of business equivalent of alien abduction.