Transport operator FirstGroup has secured its second franchise extension within a week after the UK government said it could keep running the Great Western route for at least another four years.
The Aberdeen-based group said the service would benefit from its largest fleet upgrade “in a generation”, with three million additional seats a year and shorter journey times from London to South Wales and south-west England. Under the agreement with the UK Department for Transport (DfT), the firm will operate the franchise until 1 April 2019, with the possibility of a one-year extension.
FirstGroup chief executive Tim O’Toole said: “As the proud operators of this important franchise, we will be using our unrivalled knowledge and experience of the network to help deliver significant upgrades over the next few years, in particular the introduction of new trains as the mainline is electrified.
“We are already working closely with the DfT and Network Rail to deliver the initial phases of the £7.5 billion Great Western Mainline modernisation programme. This investment is the biggest on the route since Brunel, and will transform a key part of the country’s transport infrastructure.”
It follows the DfT’s announcement on Friday that FirstGroup had been given the right to keep running its TransPennine Express franchise – a joint venture with French public transport firm Keolis – until April 2016.
Transport Secretary Patrick McLoughlin said the Great Western agreement was a “fantastic deal” for passengers, who will get “more seats, more services and brand new fleets of modern trains”.
He added: “This government knows the importance of our railways. That is why they are a vital part of our long-term economic plan, with over £38bn being spent on the network between 2014 and 2019.”
FirstGroup will pay the government about £68m to operate the Great Western franchise from September 2015 until April 2019, but train drivers’ union Aslef said the award of the franchise was “absolutely outrageous” and “guaranteed the company an income with virtually no risk and no incentive to improve performance”.
General secretary Mick Whelan said: “I find it incredible that the Secretary of State for Transport can say this represents good value for money for passengers and taxpayers. FirstGroup had his department over a barrel on this – and named its price.
“He should have given the Great Western franchise to Directly Operated Railways. Then we might have seen some returns to the taxpayer rather than to FirstGroup’s shareholders.”
Taxpayer-owned Directly Operated Railways ran the East Coast franchise until the start of this month, when a joint venture between Perth-based Stagecoach and Virgin Trains took over the service between London and Scotland.
The Great Western route is in the UK, bringing in annual revenues of about £1bn, and analysts at Shore Capital said the extension was an “important agreement” for FirstGroup ahead of the general election in May.
The broker, which has a “buy” rating on the bus and rail operator’s shares, added: “Most importantly it underpins our forecasts out until the expensive fixed debt rolls off and FirstGroup can start restructuring its balance sheet.”
David Sidebottom, director of rail passenger watchdog Passenger Focus, said: “Passengers will welcome the stability that this new contract will bring. However, they will want to be assured that it will deliver real, timely benefits to them.”
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