FEARS over East Coast rail services are mounting after operator National Express yesterday admitted the recession has hit its finances.
Shares in National Express fell 7% as it confirmed revenue on the East Coast Main Line – linking the North East region with London and Scotland – grew by just 0.3% in the first three months of 2009, compared with 9% growth last year.
The news is alarming because National Express’s winning bid for the East Coast rail franchise in 2007 was based on strong revenue growth, with the Government being promised £1.4bn over the life of the contract due to end in 2015.
The developments came as National Express yesterday held its annual general meeting amid reports the franchise will be axed as the recession bites.
The RMT union said the Government should renationalise East Coast services, while former Rail Minister Tom Harris told The Journal that National Express should “pay the price” if it had got its sums wrong.
But trains could be run under a fixed-fee management contract before being re-let to another company – although Government sources stressed there was “no guarantee” of National Express running any services if that was to happen.
National Express insisted it could not comment on such speculation, but stressed the terms were “agreed in a very different economic climate” and that it was not due to get revenue support for the franchise from the Department for Transport (DfT) until the end of 2011.
“The group is engaged in regular discussions with the DfT, which include the impact of the recession on the East Coast franchise,” added the company.
In 2007, after it took over from GNER, the firm said it was “very confident” it could meet the premium payment to the Government – stressing revenue growth would be driven by higher passenger numbers.
But National Express is now saddled with £1.2bn of debt and faces tighter lending terms from July. The company has lost 750 jobs, and dividend payouts and capital spending have also been cut.
And it is reviewing options to strengthen its finances, including a potential cash call on shareholders.
RMT general secretary Bob Crow said: “Rather than plugging in the life support machine for National Express, ministers should be seizing the chance to return this big section of the rail network to full public ownership and control.
“RMT has no time for private companies who promised the earth when they took on these franchises and who are now going cap-in-hand to the Government, pleading poverty.
“They saw the railways as a fast route to an easy profit at the taxpayer’s expense and now’s the time to get shot of them.”
Former Rail Minister Tom Harris said: “It is entirely plausible they could hand it back, but I don’t think they should be subsidised by the public purse.”
He added: “If they are going to want to be a private company, they have got to accept that if they make the wrong judgment they have got to pay the price of that.”
National Express also said revenue growth on its East Anglia and c2c rail franchises slowed to 3.8% and 4.6% respectively.
Bus and coach travel was more resilient, with growth of 4.1%, boosted by more people holidaying in the UK.
Despite the “challenging” conditions, overall revenues in the first three months of the year were up 7.9% on last year as the pound’s weakness lifted revenues from its Spanish and American operations.
Berwick MP Sir Alan Beith said it was very worrying that yet again a company was unable to run East Coast Main Line services because of huge premiums demanded by the Government.
“It is time ministers stopped using the East Coast Main Line to subsidise the rest of the railway system, and instead of auctioning the franchise it should be made available on a basis which safeguards the service and enables train operators like GNER and National Express to do a proper job,” added the Liberal Democrat.