National Express's discussions with DfT on rail franchise hits buffers

Published on Sunday 28 June 2009 21:28

CRUNCH talks between National Express and the Department for Transport (DfT) over the future of the east coast main line have stalled.

Debt-laden National Express – which is set to give an update on its latest trading figures to investors on Wednesday – is in discussions with the DfT over amending the terms of the franchise.

But talks over the service, which takes passengers from London to Edinburgh, are understood to have collapsed when the department stood by its refusal to alter the deal.

National Express won the franchise two years ago, before the onset of the recession, and the current arrangement means that it must pay the UK government 1.4 billion by 2014.

A resolution is crucial for the beleaguered firm, but it is understood that, while the two sides had been close to a deal to replace the existing franchise, the talks have now broken down.

A spokeswoman for the government department said yesterday: "As we have made clear on numerous occasions, we do not renegotiate franchises."

It is thought initial talks involved National Express continuing to run the trains for an agreed fee, while officials would retain the right to re-let the contract.

Sliding revenues on the line have led to speculation that National Express could walk away from the deal. This would be a desperate move and could trigger defaults on its other franchises.

The rail and bus operator is thought to be mulling a 400 million cash call from investors, but reports yesterday suggested this would be dependent on reaching a deal with the DfT.

National Express received a boost two weeks ago when it won extra breathing space from tougher terms on its 1.2bn debts until the end of this year.

National Express said yesterday it would not comment on speculation. It is understood it will update shareholders on the east coast main line position in next month.