Examination of witnesses (Questions 120
- 133)
WEDNESDAY 9 DECEMBER 1998
MR W WHITEHORN
and MR M FURLONG
120. Yes, but you have also said very clearly
in answer to Mr Bennett that if in a short period of time you
cannot make it pay you will be coming back here asking for precisely
the sort of treatment he has talked about, in other words access
to the train sets.
(Mr Whitehorn) I did not say we would be doing
that. What I quite clearly said was that he was making a logical
assumption that if he assumed that it is something that generally
would be a good idea. That is a very different thing. If we were
not to make this business work then the trains would not be owned
by us anyway. They are currently under the management of the Consortium.
121. It was not the ownership of the assets
which Mr Bennett was talking about.
(Mr Whitehorn) There are no assets involved in
this business apart from the Eurostar trains themselves. There
is no risk to the public sector, there is no risk to the taxpayer,
there is no risk to anybody but ourselves if this business were
not to work. The reason we are sitting here today is because we
are confident that this business can work and we are confident
that there is a marketplace there sufficient enough to make these
Eurostars pay within three years.
122. There would be a risk to the Consortium
of course if you took their train sets away.
(Mr Whitehorn) No, no risk whatsoever. I cannot
walk off to Mongolia with those train sets, they have to stay
in the country. Therefore if the business did not work they would——
123. Believe me people have been known to
remove train sets.
(Mr Whitehorn) That is very true.
124. People have been known not only to
remove train sets but engines and lord knows what else from right
under the noses of all sorts of people.
(Mr Whitehorn) Indeed, but they do not get very
far with them.
Chairman: That is
a matter of opinion too.
Mr Stevenson
125. That does worry me. When you say no
public subsidy, no risk to the public, no risk to the public purse
because they cannot whisk the train sets away, so the only losers
if it did not work would be you.
(Mr Whitehorn) Correct.
126. I wonder whether that is correct. One
of the arguments for regional Eurostar which is being put to us
which many of us can recognise is that it has the potential to
attract investment.
(Mr Whitehorn) Correct.
127. I am an investor from Outer Mongolia.
I am seeking to invest in north Staffordshire. One of the things
I am taking into account is the transport infrastructure. One
of the things which would impress me is if there were regional
Eurostars operating through that area. I should also want to be
pretty sure that when I took my investment decision, those services
were going to continue to operate. When you say that if your plans
do not work the only loser is you, I do not think that is entirely
correct, do you?
(Mr Whitehorn) Yes, I do think it is entirely
correct.
128. You do think it is correct. What would
happen then to the credibility of people seeking investment into
the regions, the Midlands, the north west and so on? They would
be saying they have Eurostar services now, which helps to put
the investment package together, they can make it more attractive,
and we have heard from other people today about how important
it is for an investment, but Virgin operating this are saying
they are going to have to pull out next year if they cannot see
their way forward. Can you see the question I am putting to you?
It is absolutely vital that if these services are to operate,
with the wider criteria and considerations taken into account,
the mindset of companies like yours is not simply "Look,
so if it doesn't work, so what, we are the only ones who have
lost".
(Mr Whitehorn) That is not our mindset. Our mindset
is that we believe that the business can work, we would not be
sitting here today if we did not. We also know from the point
of view of Staffordshire and their customers from Outer Mongolia
who are visiting them to set up a business, that if there are
no regional Eurostars, they do not have that to offer to the investors
from Outer Mongolia at all. Therefore the alternative to going
forward and developing regional Eurostars is having nothing to
offer of that nature. What we are offering is to undertake the
business on the basis of the plan, details of which we are quite
happy to give to this Committee. What we are saying is that the
risk to the Committee and the risk to the public and the risk
to the taxpayer of this not working is zero financially. I totally
agree with you that it would be a great shame if the regional
Eurostar services were started and then had to be terminated at
a later date. The whole basis of our approach to this business
and approach to looking at the business has been to create a viable
operation and a viable service. However, I cannot sit in front
of a Committee like this with any honesty and guarantee for 100
years that we will always run regional Eurostars.
Chairman
129. You would expect this to be a profit-making
business within a certain amount of time. Do you expect it to
be subsidised by the rest of the Virgin Group during the opening
years?
(Mr Whitehorn) In no way whatsoever. We have a
specific business plan and capital will be raised specifically
for those first three years of operation.
130. You would not expect, even though yours
is a very interesting holding company, any subsidy from any other
section.
(Mr Whitehorn) No, after being an investment in
the business to start with it will have to be capitalised. We
reckon it will take about £10 million; £10 million is
the startup capital required.
131. You are quite confident that you would
find that without any difficulty at all.
(Mr Whitehorn) Absolutely.
132. Why do you think you would be so much
more successful than say LCR?
(Mr Whitehorn) In what sense? Why do we believe
we could operate the business?
133. Yes.
(Mr Whitehorn) One of the reasons is that we already
have an operation whereby we can create some quite significant
economies of scale in terms of things like telesales of tickets
and a number of other areas and that would be helpful.
Chairman: I see. They
would enjoy the high standard of service that we enjoy from the
other bits of Virgin Rail. That is excellent. It is quite clear.
Thank you very much, we are very grateful to you both and we will
await your business plans with some interest.
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