Stagecoach loses franchise to FirstGroup and crossrail operator MTR Corp
Companies: FGP, MRI, SGC
Shares in FirstGroup (LON: FGP) rose 3% early on Monday after the transport giant confirmed it had been awarded the South West franchise in partnership with MTR Corp, edging out Stagecoach, whose shares fell 2%, to the lucrative contract.
The venture, which will be 70:30 owned by FGP and MTR, the Crossrail operator, will run from 20 August and last at least 7 years. During that time, £1.2bn will be invested in the South Western network.
FirstGroup said it had consulted commuters on areas that should be prioritized for improvement and listed the following as areas it would focus on:
- New trains:
- 750 new, larger train carriages by December 2020, and 18 additional, fully refurbished trains (90 carriages) from December 2018
- 52,000 more peak seats per day at London Waterloo compared to today’s services by December 2020
- Additional and faster services:
- From December 2018 FirstGroup plans to deliver faster services; double off-peak services between Southampton and Portsmouth and re-introduce through services between Portsmouth, Southampton, Bournemouth, and Weymouth
- Weekend services should also improve with more than 400 extra Sunday trains across the network
- Easier tickets and fares:
- The introduction of simpler fares with mobile and smart ticketing
- The introduction of flexible season tickets and new lower fares for 16-18-year-olds
- Station improvement:
- £90m will be invested in stations across the line, including a major refurbishment at Southampton Central station
- Further capacity at Waterloo will be introduced at the end of 2018 when the former Waterloo International platforms are fully redeveloped and brought back into use
Tory minister for Transport Chris Grayling said it was "great news" for passengers, and that FirstGroup and MTR would deliver the improvements the South West network needed. Whilst FirstGroup CEO Tim O'Toole said he was delighted with the news:
“Our successful bid will deliver the tangible improvements that customers and stakeholders have told us they want from this franchise. Passengers can look forward to new and better trains, more seats and services, quicker journey times, improved stations and more flexible fare options.”
Under the terms of the franchise, the operators will deliver £2.6bn real NPV (Net present value) in premium payments to the Government, with shareholders in the venture providing a loan of up to £30m and £88m in subordinated contingent loan facilities to the operator.
The South West franchise earned £991m in revenue from passengers in 2015/16 and often struggles with delays, busy trains, and strikes.
Stagecoach Group, which was unsuccessful in its bid for the franchise, said it was disappointed to have lost the franchise after 20 years. According to CEO Martin Griffiths, Stagecoach submitted a strong bid, offering a transformation in the travel experience and investment to the railways, but on this occasion, it lost.
Shares in Stagecoach fell 2% early on Monday.
