UK watchdog could let FirstGroup, TrenItalia run West Coast rail franchise

(Reuters) - A joint venture led by FirstGroup FGP.L could get the go-ahead to operate Britain's West Coast Main Line, one of the busiest in Europe, Britain's competition watchdog ruled on Friday.

The Competition and Markets Authority (CMA) said it could accept concessions offered by the venture, which includes Italy’s TrenItalia, designed to address the competition concerns.

TrenItalia UK and First Rail had secured the British rail franchise that links London, Manchester and Glasgow in August. FirstGroup is already involved with the Great Western, South Western and TransPennine Express franchises.

“(CMA) considers that there are reasonable grounds for believing that the undertaking offered, or a modified version of it, might be accepted by the CMA to remedy the substantial lessening of competition identified by the CMA,” the watchdog said in a statement.

The undertakings include assurances by the parties to cap fares and to keep the availability of cheaper, advanced fares unchanged.

The CMA now has until Jan. 21 to decide whether to accept the concessions, with the possibility to extend the time frame to March 17.

Shares in FirstGroup were 4.4% higher at 110 pence at 1257 GMT.

The award of the West Coast Mainline contract to a joint venture, 70% owned by FirstGroup and 30% by TrenItalia, marked the end of Richard Branson’s Virgin Group involvement with Britain’s railways after more than 20 years.

Virgin's West Coast partner Stagecoach SGC.L was disqualified from bidding for the new contract after it did not comply with rules over pension funding. It has challenged the bar.

The rail line will see 263 extra train services every week from December 2022. Destinations including Llandudno in Wales and Gobowen in England will be served by direct trains to and from London.

The joint venture has committed to delivering a range of improvements on the West Coast mainline.

Passenger revenues, which were 1.2 billion pounds in 2018-19, are expected to increase at a mid-single digit annual rate over the first phase, lower than the historic growth rate of the franchise over the last 10 years, FirstGroup has said.

The company did not respond to a request for comment, while TrenItalia was not available for comment.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Subhranshu Sahu and Louise Heavens