National Express wins East Coast franchise

National Express file photo.

LONDON (Reuters) - Bus and train operator National Express Group said on Tuesday it had won the InterCity East Coast rail franchise and promised better reliability, more trains and easier ways to buy tickets.

Shares in National Express, which has recently lost several lucrative franchises, were up 1.4 percent at 1,163 pence by 9:30 a.m. to be one of the top gainers among London's top 350 stocks.

The East Coast franchise, which covers services connecting London with Scotland via Peterborough, Leeds and Newcastle, will start on December 9 and run until March 31, 2015, with the last 17 months conditional on performance levels being reached.

Finance Director Adam Walker told reporters redevelopment of the area around the line's London terminus at King's Cross, including a new station for Eurostar services from Europe, would boost travel and revenues, as should the 2012 Olympics.

National Express, which also runs 14,000 school buses in North America and has a bus and coach business in Spain, forecast annual revenue of 600 million pounds from the franchise in its first full year.

Regulated fares can rise by an average of 1 percent above the RPI measure of inflation over the life of the franchise, while unregulated fares can rise by an average of 2.1 percent above RPI.

The Department for Transport said it would receive payments with a net present value of 1.4 billion pounds over the life of the franchise.

Goldman Sachs said in a broker note: "Looking at the detail, the subsidy to premium profile of the bid looks less aggressive than other recent franchise bids.

"Although the shares outperformed versus peers on the press rumours yesterday (that National Express had won), today's confirmation is likely to be a further positive for the shares."

National Express plans to get extra rolling stock for the East Coast route by leasing refurbished carriages that had run on the West Coast main line until replaced by new Pendolino units.

National Express plans to offer a free WiFi service to all passengers, not just first class. From March 2009, travellers will be able to reserve specific seats online as well as the parking for cars at stations.

National Express beat off competition for the franchise from Arriva, FirstGroup and a 50/50 joint venture between Stagecoach Group and Virgin Group.

The franchise came up for grabs after former holder GNER gave it up last year because its parent, transport group Sea Containers, was in financial difficulties, not least because of the premiums GNER had been paying.

In March 2005, GNER agreed to pay 1.3 billion pounds to the government for the right to keep running the east coast main line for another 10 years, then the most expensive rail concession in European history.

GNER, which is paying the costs of re-letting the franchise early, will continue to operate East Coast services until December.