Stagecoach to continue Virgin JV to secure West Coast franchise
TRANSPORT group Stagecoach has said it will continue to work in partnership with Virgin Trains to try to secure the lucrative West Coast Main Line franchise.
The group has been shortlisted by the Government as one of the preferred bidders for the new franchise, which will come into effect later next year. It has also been shortlisted for the Greater Anglia franchise.
In its full year results statement today, Stagecoach said: “We look forward to seeing its (the Government’s) detailed proposals for reform and we will continue to evaluate franchise opportunities as they emerge in light of these policy decisions.
“As a major rail operator with a good track record of delivery, we were pleased to have been shortlisted for the Greater Anglia rail franchise and, in partnership with Virgin, for the new West Coast franchise.
The current West Coast franchise is due to end on March 31, 2012. However, the start of the new West Coast franchise has been delayed until December 9, 2012. Virgin Rail Group has entered into bilateral negotiations with the DfT to agree acceptable terms for the extension of the current franchise to December 8, 2012.
“The new West Coast franchise is expected to commence in December 2012 and will run for 14 years. Greater Anglia and West Coast are very different franchises, each with their own specific challenges, priorities and opportunities. We will continue to work with local communities and other stakeholders to develop sustainable bids to deliver the Government’s specification, improve rail services for customers, and ensure value for money for taxpayers,” added Stagecoach.
The group said the new West Coast franchise would likely include a risk-sharing mechanism based on GDP rather than revenue and will give the train operator some increased flexibility to change timetables and fares.
Across its operations, Stagecoach said operating profit in its UK Rail Division had been expected for some time to reduce in the year ending April 30, 2012 and this remained the case given the change in the premium payments to Government.
“Thereafter, the availability of revenue support should help limit the risk of profit falling short of expectations but the scope to significantly increase UK Rail profit (new franchise wins excepted) is already recognised as being limited,” it said.
Its joint venture with Virgin Rail Group, in which it has a 49% stake, saw a 10.5% rise in revenue in the year to April at £392.7m. Operating profit rose almost 55% to £39.5m.
Its share of VRG’s profit after tax for the 12-month period was £28.4m (2010: £19.2m).
The performance has been boosted on strong passenger revenue growth, which has benefited from improved journey times, more frequent services, and value deals.
Passenger volume growth has been well ahead of other long-distance train operators, and Business and First Class traffic has grown in particular as the economy has improved and better infrastructure performance has delivered more reliable services.
