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FirstGroup joint venture awarded West Coast rail franchise

The FTSE 250 transport firm will run the franchise from 8 December as part of a JV with Italian state-backed rail operator Trenitalia

FirstGroup  - FirstGroup joint venture awarded West Coast rail franchise
The franchise will be FirstGroup's fourth rail operation in the UK

A joint venture (JV) headed by FirstGroup PLC (LON:FGP) is to replace Virgin as the operator of the West Coast rail franchise.

The FTSE 250 transport firm is the majority partner in a 70:30 JV with Italian state-backed rail operator Trenitalia, which is now scheduled to run the West Coast line from 8 December 2019.

READ: FirstGroup fends off activist attempt to oust board but chairman bows to pressure

The franchise consists of two phases: phase 1, which will run from December 2019 to March 2026 and involve the JV operating the West Coast services as a shadow operator to the new High Speed 2 (HS2) rail line; and phase 2 when the firm will operate HS2 itself from March 2026 until March 2031.

The West Coast franchise covers stations between London Euston and Glasgow and Edinburgh, passing through cities such as Manchester and Liverpool.

Meanwhile, HS2, scheduled for completion in 2026, will initially connect London and Birmingham via a high-speed rail link, with extensions planned towards Leeds and Manchester in later years.

FirstGroup has said it will offer more than 260 extra services per week on the franchise as part of its tenure, as well as completely refurbishing its fleet of 56 Pendolino trains.

Matthew Gregory, FirstGroup’s chief executive, added that following the franchise award, the company’s fourth in its UK rail portfolio, it would not be seeking new franchising opportunities “for the foreseeable future”.

The company also said that “no ongoing pension liabilities” would remain at the end of the franchise period, with the Department for Transport taking on the liabilities for the second phase of the contract.

Pensions have been a sore spot for Britain’s rail industry this year, with rival transport firm Stagecoach Group PLC (LON:SGC) having been disqualified from bidding for three franchises this year over concerns about pension commitments.

One of those was the West Coast, which Stagecoach currently runs in a JV with Virgin but now will see Richard Branson’s trains disappear from the UK’s railways after 22 years.

Franchise “doomed to failure”, says union boss

Shortly after the award was announced, Mick Cash, general secretary of the National Union of Rail, Maritime and Transport Workers (RMT), slammed the new franchise as a “political fix” which was “doomed to failure”.

"The announcement this morning that First Trenitalia are being shunted on to the West Coast Mainline to replace Virgin/Stagecoach in the midst of the rail staff pension row is just another political fix by a Government whose privatised franchise model is collapsing around their ears”, Cash said.

The union boss added that the UK government was “taking yet another gamble” on private ownership rather than taking what he said was “the popular public sector route” of renationalisation.

Investors, however, were less gloomy as the shares were lifted 0.7% to 115.8p in early trading on Wednesday.

Quick facts: FirstGroup

Price: 116.6 GBX

LSE:FGP
Market: LSE
Market Cap: £1.42 billion
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