I also recollect Branson talking in the early 2000s of them operating 5 daily LHR-MAN services i.e. prior to bmi competing with BA. Granted that Virgin Trains is dumping capacity between Manchester and London in a way that wouldn't be allowed in the aviation industry, why would Branson want to compete with himself?
Even allowing for them relying on connecting passengers they hardly have the network of services to allow them to acheive a critical mass to make this domestic service worthwhile.
i've also found this:
Branson's 2006 bid for bmi with an interesting statement regarding LHR-MAN