The battle between Scotland’s transport giants for Britain’s biggest rail franchise has been stepped up with an alliance between Hong Kong’s MTR and FirstGroup to bid for Stagecoach’s South Western territory.
MTR will take a 30per cent stake in FirstGroup’s bid, four months after the two Scottish firms were shortlisted by the Department of Transport for the £1billion franchise.
Steve Montgomery, the former ScotRail chief who is now First Rail’s managing director, said: "We have extensive expertise of running commuter, inter-urban, regional and long distance services – such as those that make up the South Western franchise – and a strong track record in delivering passenger growth.”
Aberdeen-based FirstGroup is the only challenger for the franchise which generates 14 per cent of all UK passenger journeys and has been the flagship of the Stagecoach rail business for 20 years. South West Trains runs services from London Waterloo across Southern England and on the Isle of Wight, and is one of the highest-profile commuter railways into the capital.
It marks a heightened effort by Aberdeen-based FirstGroup, led by chief executive Tim O'Toole, to respond to its defeat by Stagecoach-backed Virgin Rail on the west coast franchise, which Virgin retained in 2012 after threatening court action to overturn FirstGroup’s win, and then on the east coast route in 2014 whenVirgin saw off FirstGroup and a French consortium.
A third cross-border franchise Trans-Pennine Express was retained by FirstGroup last December, its first bidding success after four years of setbacks. They included the loss last year of ScotRail to Dutch state operator Abellio, despite a performance record which won First ScotRail the ‘operator of the year’ award in 2014.
MTR was also an unsuccessful bidder for ScotRail, in a competition judged by the Scottish Government, but it has landed two major rail licences in the south of England, including the London Overground concession in a joint venture with German-owned Arriva.
MTR was created in 1975 to run Hong Kong’s mass transit railway and is 77 per cent owned by the Hong Kong government. It runs metro lines in three Chinese cities, subways in Stockholm and Melbourne, and is also currently biding for a renewed London Midland rail franchise.
FirstGroup pointed out yesterday that MTR’s Overground network “serves Clapham Junction, the busiest station on the network and a key hub for the South Western franchise”.
Turnover at South West Trains topped £1billion for the first time last year, a rise of 10 per cent. Its revenue support from the government rose by £8m to £168m, but profits were flat at £29m as the cost of the franchise jumped from £461m to £554m.
In April Stagecoach reported a slowdown across its rail business, with year-on-year growth almost halved from 4.6 per cent to 2.5 per cent.
Stagecoach chief executive Martin Griffiths said when the south-western shortlist was announced: “The next franchise requires a transport operator that fully understands this complex network, grasps the massive challenges ahead and has a track-record of delivery and working effectively with industry partners.”
But Mr Montgomery said yesterday: “Together, FirstGroup and MTR will develop an innovative and value for money proposal that will deliver better connectivity and significant improvements for South Western customers.
"Our bid will keep people moving and communities prospering across the region.”
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