Stagecoach fails to secure direct award of South West Trains franchise

Stagecoach has failed to reach agreement with the government over renewal of its South West Trains rail franchise.

The company said the Department for Transport had ended talks over awarding the contract directly to Stagecoach. The DfT plans to invite train operating companies to bid for the franchise, which mainly runs commuter services between London Waterloo and Surrey, Hampshire and Dorset.

Stagecoach has run South West Trains since British Rail was privatised in 1996 and was last awarded the contract in 2007 for 10 years. It is one of the UK’s biggest rail franchises, operating more than 1,600 trains a day and carrying 220m passengers a year.

With the current contract due to expire in February 2017, Stagecoach had been in talks with the government over a direct award to operate the service at least until April 2019. Last month, Stagecoach said progress on talks had been disappointingly slow and that there was no certainty a deal would be reached.

Announcing the termination of discussions, the company said: “Despite extensive negotiations, a significant difference has remained between both parties regarding the financial evaluation of the proposals. As a result, South West Trains has been unable to reach an agreement on a direct award.”

Stagecoach said despite its failure to secure a direct award, it was in a strong position to bid for the contract against other operators. The company also runs the East Midlands service and jointly runs the East Coast and West Coast franchises with Virgin Rail. Stagecoach shares fell almost 1% to 399.5p in early trading.

Sir Peter Hendy, who was appointed as the new chief executive of Network Rail last month, said in April that London commuters hated their rail services. He said inspectors on South West Trains fined people who had made simple mistakes when purchasing a ticket.