Outsourcing giant Serco yesterday revealed it expects to boost revenues by £800 million after being confirmed as the winner of the franchise to operate the next generation Caledonian Sleeper service connecting Scotland to London.
The company said it would invest more than £100m in new trains after it takes over next spring, with modernisation efforts partly funded by a £60m grant from Scottish ministers.
It will also collect around £180m in franchise payments over the course of the new contract, which begins in April.
The new fleet is expected to include en-suite berths, cradle seating, pod flatbeds and a brasserie-style club car and will also create “an outstanding hospitality service that is emblematic of the best of Scotland”.
Serco said it would improve service by working alongside Cromlix management firm Inverlochy Castle Management International and Michelin-starred chef Albert Roux, while also promoting Scotland by sourcing food and drink from small producers.
It believes the steps, alongside a new sales and reservations system and marketing improvements, will help grow passenger numbers and market share.
Chief executive Rupert Soames said the firm would bring to bear a “strong track record” when it comes to running rail services around the world.
“I am delighted that we can use this unique blend of expertise to transform the iconic Caledonian Sleeper into a modern, high-quality hospitality service to make Scotland proud,” he said.
“Serco has a very constructive relationship with many parts of Scottish Government and already operates essential public transport and many other services.
“With 3,000 Serco employees living and working in Scotland, we are tremendously excited to be delivering these new developments and meeting the vision of Transport Scotland.”
But the award marked a second franchise disappointment for Aberdeen-based FirstGroup in a week, after it also lost out in a bid for the new Thameslink contract in the south east of the UK.
The company, which runs the present sleeper service and the ScotRail franchise, had been shortlisted to continue but did not get the nod from Transport Scotland.
But First said the services presently contributed just 2% of revenues in its ScotRail business. It remains in the running for the new ScotRail franchise, which will be announced later this year.
“We submitted a strong bid which would have offered further high-quality services for passengers and a good return for taxpayers,” said CEO Tim O’Toole.
“We are tremendously proud to have provided this important service, providing a key link between Scotland and London, for the last decade and wish the team every success for the future.”
Serco, which also operates Northlink ferries between the mainland, Orkney and Shetland Islands, will commission four new, 18-carriage trains which will be built by Spanish firm CAF and are expected to enter service in 2018.
The Hampshire-based company has faced a tough year featuring a string of fines, allegations of fraud over overcharging on an electronic tagging contract, and a host of other contract bungles.
Rail unions raised concerns about the award, with leader of the TSSA rail union Manuel Cortes saying the franchise award “flies in the face” of the SNP’s hopes of “an independent, financially strong Scotland”.
Transport Minister Keith Brown said the Scottish Government had “no choice” but to follow the franchising process, adding that Serco had submitted “the best bid”.
Serco business development manager Jamie Ross said the company was “fully committed” to the decade-and-a-half long deal, which includes a break clause after seven years.