FirstGroup and Hong Kong’s MTR win South West Trains franchise from Stagecoach

FirstGroup and Hong Kong’s MTR win South West Trains franchise from Stagecoach

A consortium of travel operator FirstGroup and Hong Kong-based firm MTR has won the contract to operate the South West Trains franchise.

Travel group Stagecoach has operated the network since it became the first company to take over a British rail franchise in 1996, but its bid was overlooked in favour of the joint venture.

FirstGroup and MTR will take over the franchise in August this year, with the contract running until 2024. South West Trains operates services running to London from cities such as Bristol and Exeter, while it has a strong commuter base from suburban areas south of the capital.

The investment is split 70pc in favour of FirstGroup, whose chief executive said the deal helped build the company’s momentum as it continues its recovery from a crisis in 2013, when it scrapped its shareholder payout and was forced into a £615m rights issue to boost its finances. The consortium will pay a premium of £2.6bn over seven years.

MTR runs the Hong Kong Metro and last year reported its best performance since 2008, with 99pc of its trains running on time. It previously ran London Overground services alongside Arriva, and in 2014 it won the contract to operate the Crossrail commuter service.

“MTR approached us,” said FirstGroup boss Tim O’Toole. “When we put in our expression of interest it was just FirstGroup but it made perfect sense to partner with them because of the heavy commuter component of this franchise and we knew we could benefit from MTR’s very disciplined approach.”

There were also connections between the two companies through Jeremy Long, the boss of MTR’s European business, who was previously the managing director of FirstGroup’s rail division.

Under the terms of the agreement, the two companies will introduce a fleet of 90 new trains and add 22,000 extra seats into London Waterloo on every morning peak and 30,000 extra seats on every evening peak.

They have also vowed to speed up services to London, with journey times reduced by eight minutes from Southampton and 10 minutes from Reading.

“It is all about putting together a tighter timetable and making sure we have the kind of disciplined operations at every station so that this can run as a machine every morning,” Mr O’Toole said.

Transport secretary Chris Grayling last year unveiled plans to hand more power over Britain’s train tracks to the operators, taking it away from Network Rail.

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