New National Express chief vows to hold on to East Coast route

Published on Sunday 5 July 2009 21:43

TROUBLED transport group National Express has vowed to battle on with all of its rail operations, despite the government saying it would renationalise the prestigious East Coast Mainline.

Interim chief executive Ray O'Toole yesterday claimed that he did not believe the government could strip it of the East Coast line yet as it had not defaulted on its obligations.

Transport Secretary Lord Adonis said last Wednesday that the line, which runs between Scotland and London, was to be taken back into public hands and warned the government might strip National Express of its other rail franchises, East Anglia and c2c.

Lord Adonis said of National Express that it was "simply unacceptable to reap the benefits of contracts when times are good, only to walk away when times become more challenging".

On Wednesday, the firm admitted it was likely to default on payments for the East Coast franchise, for which it had agreed to pay the government 1.4 billion over seven-and-a-half years.

A ring-fenced business that operates the franchise is expected to run out of money before the end of the year. But O'Toole, who was thrust into the role as former chief executive Richard Bowker quit last week, said the group would continue to try to attract passengers back to the East Coast line and added that as it has not defaulted on its obligations, it was premature of the government to say it would strip the group of the franchise.

He said: "It (nationalisation] is not a definite outcome. The government can't suddenly come along and decide that it wants to take it off us."

He also vowed to extend its other two franchises, East Anglia and c2c, claiming the circumstances the company was in were not ones that could lead to a "cross-default", where the problems with one franchise would lead to it defaulting the right to another. Under normal circumstances, if National Express meets all of its performance targets for the East Anglia franchise this year, then it will automatically be extended to 2014.

It has also been claimed that National Express is planning a 400 million cash call and to cut its dividend in an attempt to reduce its 1.2bn debt pile.

As well as its battle with the government, the company is facing the prospect of a takeover by a rival.

Aberdeen-based FirstGroup has already confirmed that it has approached National Express about a merger, while there was speculation at the weekend that Perth-based Stagecoach might also be interested in the transport company.