14 August 2007

NEG win East Coast franchise

It was announced this morning that National Express Group have been awarded the East Coast franchise:

National Express has triumphed in the battle to run the main London-to-Scotland rail route after promising to boost capacity, cut delays and lower fuel consumption. The company fought off competition from Arriva, First Group and Virgin Trains to operate the east coast mainline. The contract, which runs from December 9 this year to March 31 2015, was awarded by the Department for Transport this morning. It was put out for tender after GNER, the current operator, admitted it could not afford to run the franchise.

National Express's winning bid is worth £1.4bn - £100m more than GNER had previously agreed to pay. Adam Walker, the company's finance director, insisted this morning that National Express could afford to make those payments to the government and still make a profit on the route. He also tried to reassure passengers that fares would not rise sharply, although some fares will rise by up to 18% above
the RPI measure of inflation over the life of the contract. "Our policy is to stimulate demand on the rail network. If you raise fares substantially you'll still sell tickets in the short term, but that's not the right way to run the business in the long term," Mr Walker said.

National Express plans to raise unregulated fares, such as off-peak tickets, by an average of 2.1% more than the rate of inflation each year. Regulated fares, such as commuters' season tickets, will rise by an average of 1% above inflation each year. It will spend £24m on new rolling stock, letting it run an extra 25 services a day from December 2010. It has also promised to cut delays by 29% by the end of the franchise. Mr Walker said National Express would appoint an environmental officer for the route to help it hit a target of cutting fuel consumption per passenger kilometre by 28%.

It has promised refunds for any customers who book a seat only to find they have to stand throughout the journey. It will also offer free wireless internet access to all passengers - currently only first class passengers are not charged for Wi-Fi.

Shares in National Express rose by 17p to £11.65 following the announcement, an increase of almost 1.5%, but later fell back 2p to £11.45. They gained more than 8% yesterday amid speculation that the company would win the franchise. National Express had previously failed to win the Cross Country, London-Midland and east Midlands rail franchises, which were all awarded earlier this year.
Text: The Guardian online