Stagecoach is among four bidders for a lucrative new trains franchise in London and the south of England, which would increase its rail revenue by more than 50%.

Stagecoach is among four bidders for a lucrative new trains franchise in London and the south of England, which would increase its rail revenue by more than 50%.

The four runners in the race for the new South Central franchise, unveiled yesterday by the Department of Transport, also include National Express, Go Ahead's joint venture Govia, and Dutch operator NedRailways. But two other overseas operators thought to be interested, Danish State Railways and MTR of Hong Kong, are not on the list.

The new territory will create a £400m franchise based on the current Southern com-muter franchise linking the south coast to London, operated by Govia, which carries 100,000 passengers a day. It will add in the cross-country Tonbridge to Redhill route, now in the south-eastern franchise, and the Gatwick Express service, which Govia took over from National Express two months ago.

Bidders have been told they must make commuter travel safer, with staffing hours extended at 50 stations and improved CCTV across the franchise, as well as increasing capacity by 25%.

Other planned improvements include the introduction of Oyster-style smartcards, safer stations, later running services, as well as better reliability and environmental performance.

But annual fare increases must be limited to 1% above inflation for the life of the eight-year franchise, which begins in December 2009.

The new contracts also require the owner to help with the extension of the East London line into south London by 2010 and the £5.5bn Thameslink programme National Express, which ran ScotRail until replaced by FirstGroup in 2004, last year took over the East Coast franchise from struggling Sea Containers/GNER, and it also runs the trains in East Anglia. NedRailways has a UK foothold in a joint venture with Serco, so far running the MerseyRail and Northern franchises, while Govia also runs the Southeastern and London Midland territories.

Stagecoach has its flagship South Western franchise, though its renewal from the original South West Trains pushed the group's rail margin down from 10.3% to 7.6% last year. Its capture of the East Midlands franchise, however, boosted rail operating profits to £59m, plus £32m from its 49% interest in Virgin Rail Group, totalling almost half its group operating profits.

Go Ahead boosted the sector in June when it revealed double-digit growth in passenger numbers and forecast a likely rise in profit this year, having warned earlier this year that it might fall.