Stagecoach not ruling out bid for new East Coast rail franchise
The Department of Transport last week confirmed plans to end the franchise contract three years early.
Stagecoach has not ruled out bidding for the same loss-making East Coast rail franchise that sparked controversy last week after the Government said it would end the existing contract three years early.
Chief executive Martin Griffiths said the company was “working with the Department for Transport towards new contracts at Virgin Trains East Coast”, that could effectively set fresh terms until 2020.
It has also not ruled out plans to bid for a fresh contract on the same franchise once it comes back up to tender, a spokesperson for the company confirmed.
Stagecoach and Virgin had together agreed to pay the Government £3.3 billion to run the service until 2023, but last week the Department of Transport confirmed controversial plans to prematurely end the franchise contract three years early.
There were concerns that the two companies were considering pulling out of the deal for financial reasons, which is what National Express did in 2009.
Stagecoach was forced to take on a one-off charge of £84 million earlier this year due to “anticipated losses” over the next two years under the “onerous contract”.
Transport Secretary Chris Grayling has said a new East Coast Partnership will take on responsibility for both intercity trains and track operations on the route after 2020.
Lord Adonis, chairman of the National Infrastructure Commission, described the decision as a “bailout”, with the early termination of the franchise accused of costing taxpayers hundreds of millions of pounds.
However, Stagecoach’s comments mean the company could potentially be granted the same franchise under different terms if it decides to bid.
Shadow Transport Secretary, Andy McDonald, said a Labour Government would go as far as banning Stagecoach from running rail services in the UK.
“The idea that Stagecoach may again bid for rail contracts following the company’s failure on the East Coast line shows that the rail franchising system is truly broken beyond repair.
“Labour would ban Stagecoach from running passenger rail operations in the United Kingdom.
“Transport Secretary Chris Grayling should commit to doing the same and come clean about the taxpayer bailout to the company he signed off last week.”
The news comes as Stagecoach reported an 8% jump in half-year pre-tax profits, hitting £96.7 million in statutory pre-tax profits, up from £89.5 million over the same period last year.
Stagecoach has maintained its full-year targets, but cautioned that UK rail profits will be “modest” over the second half of the financial year.
The group reported an overall drop in revenue from £2 billion to £1.8 billion after seeing its South West Trains franchise expire in August.
That expired franchise, compounded by higher bidding costs, is set to drag on its UK rail business over the second half of the year, despite profitability at its East Midlands Trains division.
But Mr Griffiths cheered “positive progress” across the business.
He said pricing “action”, which included hikes earlier this year, as well as service changes, were “delivering the results we expected”.
Its North American operations reported higher profits, new contract wins and “improved revenue trends”, the chief executive added.
“Our expectation of adjusted earnings per share for the year ending 28 April 2018 is unchanged. We see positive long-term prospects for public transport.
“There is a large market opportunity for modal shift from cars to public transport against a backdrop of technological advancements, rising road congestion and increasing environmental awareness.”
Shares in Stagecoach were up 3.8% or 6.8p at 183.2p in morning trading.