THE world's biggest tram operator is set to be axed from Edinburgh's troubled project as part of a major cost-cutting drive, The Scotsman can reveal.
Transdev, the French company hired to operate the capital's trams more than five years ago, is thought to be on the verge of being ditched as part of a major shake-up of the 500 million project.
Instead, the trams would be operated by the new company due to formed through a planned merger of Lothian Buses, the city's main bus operator, and Transport Initiatives Edinburgh, the council-owned firm in charge of the project.
The move would be a major embarrassment for the tram project, which trumpeted the awarding of the contract to Transdev in 2004 to take responsibility for the smooth running of the trams, engineering and staffing issues.
Senior figures at the Paris-based firm are in talks about formally ending its involvement within the next few months. Officials leading the tram project are hoping an amicable split will avoid the prospect of a costly court action, as they are already embroiled in a bitter legal dispute with a German firm leading the consortium which is building the tram network.
However insiders have questioned whether Lothian Buses has enough expertise to take on the running of the scheme and said the expected scrapping of Transdev's involvement was a "further sign of panic and chaos" within the project.
Transdev declined to comment yesterday while TIE would only confirm that a major review of the project is underway.
Transdev - which operates trams, buses and river shuttles in more than 70 cities worldwide - is understood to have been paid more than 10 million since winning a four-way contest.
It even set up a new company to prepare for the lucrative 15-year contract. However insiders say Transdev are likely to be ditched by the end of the year due to the need to cut costs as quickly as possible.
The trams may not be up and running until early 2013 - some two years later than planned - and there are fears it is some 90 million over budget. Speculation is mounting that key sections of the route between Leith and Edinburgh Airport may be shelved, while the council is considering borrowing tens of millions of pounds against future tram and bus profits in order to help fill the black hole.
One insider said: "The decision to ditch Transdev has been on the cards for a while. There have been growing questions about why a firm like this is needed to run the trams when there is already a major bus opertor in Edinburgh."
However another source close to the project said: "This is the world's leading tram operator, which has spent years and millions of pounds working on the Edinburgh scheme. The whole thing must be in absolutely dire straits for them to be ditched at this point."
A spokeswoman for TIE said: "As with any project of this size it is appropriate to review the way in which we approach certain aspects of delivery to ensure that we achieve best value for money and efficiency. We are working on an ongoing basis with a number of contractors to review how best we can provide services throughout the building of the project and beyond."
Richard Jeffrey Chief executive of Transport Initiatives Edinburgh, the council-owned company in charge of the tram project, took on the job in May.
David Mackay TIE's former chairman was appointed to head up Lothian Buses last month and is expected to be chair of the new body formed out of the merger with the tram company.
Gordon Mackenzie The city councillor responsible for delivering the local authority's 500 million project has been in charge since May.
Neil Wood General manager of Transdev's team working on the tram project, who was appointed in January of last year.