Adonis punishes National Express

Published on Thursday 26 November 2009 20:54

DEBT-laden transport group National Express is to be stripped of its East Anglia rail franchise three years early, the UK government revealed yesterday.

The decision by Transport Secretary Lord Adonis comes after the company's loss-making East Coast Main Line franchise linking Edinburgh and London King's Cross came under public control this month.

National Express's profitable East Anglia franchise could have been extended until 2014, but Adonis said the franchise would end in March 2011.

The company – whose 360 million rights issue to shore up its balance sheet will be voted on at an EGM today – had not ruled out mounting a legal challenge if Adonis had "cross-defaulted" it for walking away from the East Coast franchise.

The "cross-defaulting" would have seen the Department for Transport (DfT) remove immediately from National Express both the East Anglia franchise and its c2c commuter franchise into London Fenchurch street.

But Adonis said he judged the public interest "would not be served by terminating the franchises immediately, necessitating state management during the refranchising period and three operators in two years".

Earlier this week, the DfT announced a bidding timetable for the profitable c2c line, which will change hands in May 2011.

Adonis added: "In determining the future of the c2c and East Anglia franchises, my overriding concern has been to minimise disruption to passengers and staff, and cost to the taxpayer, while ensuring train companies stand by their commitments."

He said these objectives were best served by terminating the East Anglia franchise in 2011, "causing them (National Express] to forgo three years of profit, and beginning the re-franchising process immediately so that a new operator is in place in early 2011".

National Express said that, while the East Anglia decision was expected, it was "disappointed given the excellent improvement in performance delivered by the group over the past five-and-a-half years of operating the franchise".

Adonis said National Express remained bound to comply with its obligations as the clock runs down on its two remaining rail franchises. He added: "My department will be monitoring performance closely in the coming months to safeguard the interests of the travelling public."

The East Coast Main Line is being run in the public sector for the next two years by a new company – East Coast.

National Express was the third operator to lose or be stripped of a rail franchise in the past six years, following on from Connex out of London Victoria in 2003 and GNER – also on the East Coast Main Line – in 2007.