National Express loses rail franchise

National Express loses another line

National Express are to lose their East Anglia rail franchise three years than anticipated according to the Department for Transport and National Express.

The franchise was due to be extended until 2014, had National Express not defaulted on another main line rail service - the East Coast Main Line - earlier this year. Now, the company will lose its sole remaining rail franchise on 31 March on 2011, leaving only its bus business.

National Express defaulted on the East Coast main line in July forcing the government to nationalise it. The company had agreed in 2007 to pay £1.4 billion over seven years to run the line, but this amount turned out to be too much and the government refused National Express's requests for its contract to be renegotiated.

The route, which runs trains between London and Edinburgh, carries over 17 million customers a year. The government's decision to relieve the company of their East Anglia line was described as 'expected' by National Express, but also said it was 'disappointed' by the announcement.

New operator to be found

The Department for Transport said that it had not been in the best interest of the public to terminate the franchises immediately because that would have meant that the government would have had to have run the lines while a new operator was found.

As such, National Express will continue to operate it till 2011, whilst Transport Secretary Lord Adonis begins the process to secure a new operator.

Since National Express lost the East Coast line, it has been run by a state company who will manage the line until 2011. It is doubtful whether a state company will take over the East Anglia line, but after National Express' failure to manage the East Coast line, the government deemed it unacceptable for the company to run other rail franchises - East Anglia and c2c, the London to Tilbury and Southend line.

In a statement, the Department of Transport said, "In determining the future of the c2c and NXEA franchises, my overriding concern has been to minimise disruption to passengers and staff, and cost to the taxpayer, while ensuring that train companies stand by their commitments."

"However, my judgment is that the public interest would not be served by terminating the franchises immediately, necessitating state management during the re-franchising period and three operators in two years."

In a counter statement, National Express said, "Whilst this decision was expected given the event of the default of the National Express East Coast franchise, the company is disappointed given the excellent improvement in performance delivered by the group over the past five and a half years of operating the franchise."

The government's decision comes right before a crucial National Express shareholder vote, where a proposed rights issue to raise £360 million will be decided upon.

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