North-east transport firm FirstGroup yesterday said it was disappointed to have lost the UK’s largest rail franchise after the Department for Transport handed a new seven-year deal to rival Govia.
The Aberdeen-headquartered giant, which earlier this week revealed it would suspend its dividend for a second year amid a huge turnaround effort, had run the Thameslink service since 2006 and said it had made a string of improvements over its eight years in charge.
But chief executive Tim O’Toole said the blow would not alter his firm’s medium-term targets, and stressed that the ScotRail operator was also shortlisted for a string of other franchise deals.
He expects to net enough deals to ensure earnings “on a par” with the company’s last round of contracts.
“We submitted a strong bid which would have delivered high quality services for passengers, value for taxpayer and an economic return for shareholders,” said Mr O’ Toole said.
“We are tremendously proud to have operated a significant part of this network over the past eight years through our First Capital Connect franchise, and of the many improvements we have delivered during that time.”
Govia, a 65:35 partnership between Newcastle-upon-Tyne-based Go-Ahead and French transport firm Keolis, ran the Thameslink service between 1997 and 2006, and runs a string of other services in the south and south east of England.
The joint venture’s bid promised a string of improvements for the newly-enlarged Thameslink, Southern and Great Northern (TSGN) franchise, including 1,400 extra carriages and new tunnels to link Peterborough and Cambridge to the existing network. But the franchise award is bound to attract scrutiny as the first to be approved by the DfT since the West Coast Main Line fiasco two years ago.
The shambles in which the contract presently operated by Virgin was awarded to First, then swiftly cancelled following the discovery of “fundamental errors” in the bidding process is expected to have cost the taxpayer more than £50m.
Other bidders for the TSGN deal included Dutch firm Abellio, Hong Kong transport group MTR and Perth-headquartered giant Stagecoach.
A Stagecoach spokesman said the company would seek feedback from DfT as part of its internal bid evaluation.
“We submitted a strong, deliverable and customer-focused bid for the TSGN franchise and we are disappointed not to have won,” he said.
“We believe our proposals provided good value to the taxpayer and included clear plans to deal with the complex changes that will affect the network.”
Shares in First opened the day more than 4% lower but closed the session up 1.26% at 136.50p, while Stagecoach stock was unchanged at 378.50p.
Meanwhile, shares in Govia surged by 9% or 174p to 2,113p.