Rail line talks set to spark wave of claims

Published on Friday 8 May 2009 10:09

MOVES to renegotiate the East Coast Main Line rail franchise could open the door to rail companies across the country demanding cheaper deals than they had previously agreed with the government.

Analysts say if ministers give in to National Express's calls for the franchise to be renegotiated other rail operators "will beat a path to their door for similar treatment".

The Edinburgh to London contract carries 17 million passengers a year, but operator National Express is struggling amid falling passenger numbers and profits.

The company had been expected to make profits of around 30m a year from the franchise, but industry experts recently forecast that it could make a 6m loss in 2009.

In a bid to boost revenue, the company has announced an 11 per cent ticket fare rise which will come into effect on May 17.

GNER, National Express's predecessor on the East Coast, was forced to abandon the franchise after falling short of revenue targets.

Unless a deal is struck, it looks likely that National Express will have to walk away from the route too.

Industry insiders say any deal over the East Coast Main Line would lead to rival train operators demanding similar concessions.

Sir Richard Branson, chairman of Virgin Group, has made it clear he would insist on a fresh competition of the franchise if National Express could not pay the 1.4bn it agreed to give the government over the eight years to 2015.

Despite opposing renegotiation, many in the industry accept that National Express's problems are partly down to the government's recent policy of demanding high payments for the right to run lucrative services.

Analysts say making concessions in the dispute over the National Express East Coast franchise would put the Department for Transport's ability to collect agreed sums for other rail franchises at risk.

Stagecoach is due to pay 1.2bn over the life of its South West Trains franchise, and First Group is due to pay 1.3bn over 10 years for the Great Western franchise.

National Express chief executive Richard Bowker has argued the franchise was "agreed in a very different economic climate in 2007".

This week National Express revealed a much slower 0.3 per cent growth in revenue from the East Coast Main Line, down from 11 per cent last year,

and the firm is said to be "toiling" under the pressure of its 1.4 bn contract.

The UK's biggest rail union, RMT, warned it would be "political suicide" for ministers to agree concessions for National Express.

The RMT yesterday called for urgent action to nationalise the East Coast Main Line because the alternative – agreeing a cheaper franchise –would represent "complete and abject failure on an epic scale".