National Express to lose rail franchise

1 Jul 2009 by Mark Caswell

The East Coast rail service is to be taken into public ownership, following an announcement by the National Express Group that it will not provide further financial support to ensure that its subsidiary National Express East Coast remains solvent.

In a statement by Lord Andrew Adonis, secretary of state for transport, he said that the announcement by National Express meant that the operator “is no longer able to continue its franchise agreement to its full term”.

Adonis continued that a publicly owned company had therefore been established to take over the franchise “from the point at which National Express East Coast ceases to operate”. He said there would be an “orderly handover” between the two entities, with no interruption of services and all tickets being honoured.

Adonis said that the intention would be to tender for a new East Coast franchise operator from the end of 2010. National Express also operates rail services on the East Anglia main line and associated commuter routes, and Adonis said that while the company has said that it does not intend to default on its obligations in respect of these franchises, “the Government believes it may have grounds to terminate these franchises”.

“A company which had defaulted in the way National Express now intends would not have pre-qualifed for any previous franchises let by the Department,” said Adonis.

“I note that the parent groups of previous franchise failures are no longer in the UK rail business. It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging.”

In a statement on the National Express website the operator said:

"Discussions with the UK Department for Transport ('DfT) have not secured an improved outlook for the East Coast franchise. As a result, the loss-making East Coast rail franchise will continue to be supported by National Express in line with its franchise support commitments until the committed funding is fully utilised, expected to be later in 2009.

"In the event that the Secretary of State for Transport ('Secretary of State') reassumes control of the franchise, National Express would work with the DfT to ensure an orderly handover and ensure that passengers, services and employees are unaffected. The Group does not expect that such circumstances would result in cross default of the Group's other rail franchises."

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Report by Mark Caswell

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