National Express awarded rail extension

BIRMINGHAM based transport group National Express has won Department of Transport approval for an extension to its East Anglia rail franchise – despite the group’s bitter experiences in the sector.

The group’s mishandling of the East Coast rail franchise came close to wrecking the business earlier this year, resulting in the company recording a loss in excess of £80m. The problems lead to former chief executive Richard Bowker stepping down from his job.

The DoT has now agreed a seven-period extension under the franchise agreement, meaning a 28-week extension beyond the original expiry date of March 31, 2011.

Current chief executive Dean Finch said: “We’re pleased to have been given this initial extension and to be able to continue to serve our customers on the East Anglia franchise.

“We continue to explore opportunities to deliver our industry-leading rail performance across both our franchises beyond 2011.”

The operator recorded an £83.5m loss earlier this year due to the East Coast fiasco, with normalised pre-tax profit falling from £202.4m in 2008 to £116.2 in 2009.

When National Express (NEX) won the East Coast main line rail franchise in 2007, it was expected that passenger revenue would increase by around 10% a year, based on increasing passenger numbers and fare yield.

However, with the onset of recession this quickly became unrealistic. Far from growing passenger numbers, up to November 2009, annual passenger revenue on the franchise declined by 2%.
 
The firm said that despite service improvements the franchise quickly became loss-making and to stop it from dragging down the rest of the group, the company decided to hand the franchise back to the government.

However, the group had already provided £40m in cash to cover operating losses and paid £31.4m in a performance bond to the government.

£56.3m of the year on year fall in the group’s normalised continuing profit before taxation was written off as directly attributed to the East Coast franchise.