Bidding war for rail routes likely as firm drops franchise
East coast line temporarily renationalised as National Express struggles with debt
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Two Scottish transport giants are poised to lock horns in a new battle over intercity train services after the UK Government temporarily renationalised the troubled east coast routes.
The train operations between Scotland and London – including services from Aberdeen and Inverness – are now up for grabs for the second time in three years.
According to the government, there will be no impact on services or jobs.
Current operator National Express said yesterday it was giving up the network after it racked up losses of more than £20million in the first six months of 2009. Passenger growth has stalled in the recession and the company has failed to renegotiate the terms of the franchise, paving the way for a fresh bidding war for the routes.
A government takeover through a publicly owned company is likely later this year, with the franchise expected to go out to tender in late 2010.
Former operator GNER dumped the east coast mainline operation in December 2006, saying it was unable to meet a substantial increase in its franchise premium obligations.
GNER, whose parent Sea Containers had financial problems of its own, also said it had been “knocked sideways” by the July 2005 bombings in London, soaring electricity prices and regulatory approval for competition on parts of the east coast line.
Aberdeen-based FirstGroup and Perth-headquartered Stagecoach, in partnership with Virgin, were among transport groups that bid unsuccessfully bid for the franchise won by National Express in 2007.
FirstGroup and Stagecoach now have another chance to add the east coast operation to their fast-growing transport empires.
A spokesman for FirstGroup, which runs ScotRail services north of the border, said: “As long-term players in the UK rail industry, we are always interested in new opportunities as they emerge. We would be interested in looking at the intercity east coast franchise as and when it comes up for re-bid.”
Stagecoach, whose rail operations include west coast trains from Scotland to London, run in partnership with Virgin, said it was considering its position.
The government said its “first and overriding obligation” was to maintain services and make sure there was no fall in standards.
Transport Secretary Lord Adonis said: “We will agree an orderly handover with National Express.
“There will be no interruption of services. Existing operational staff who continue to provide a good service will transfer to the new east coast mainline company.
“I can assure the travelling public that services will continue without disruption and all tickets will be honoured.”
Scottish Secretary Jim Murphy said: “It is important that we protect passengers and also ensure operational staff keep their jobs.”
Aberdeen North SNP MSP Brian Adam said he would be seeking assurances that the move would not hamper work towards the much-awaited electrification of the route between the Granite City and Edinburgh.
He added: “The east coast mainline is a vital service for Aberdeen, whose oil and gas industry and other businesses, as well as holidaymakers, regularly use the route to reach Edinburgh, London and other destinations.
“I am pleased that we have been told there will be no loss of jobs – but we need assurances that a standard of service will be in place which makes the route a viable alternative to flying, as well as being reliable and affordable for passengers.”
Gordon Liberal Democrat MP Malcolm Bruce is also seeking assurances for the future of the Aberdeen section of the line and he urged the government to “simplify the fare structure and make rail travel competitive against air fares”.
National Express has been negotiating with the government for months over its east coast operation, for which revenue has slumped dramatically this year. The group, which recently snubbed an approach from FirstGroup over a possible takeover, is burdened with debts of £1.2billion.
National Express said it would continue to work with the government within its existing funding commitments and help deliver an “orderly handover of the franchise”.
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