FirstGroup to scrap two franchises
FirstGroup has reached an agreement with the Government over the termination of two rail franchises, the transport giant said.
The Department for Transport (DfT) has accepted that no payment is required in return for scrapping Avanti West Coast’s contract as the brand was “performing well prior to the pandemic”, according to the company.
Avanti West Coast replaced Virgin Trains as the provider of inter-city services in the region last year. But a contribution of £33.2 million is required by FirstGroup to end South Western Railway’s (SWR) deal.
The negotiations were part of Emergency Recovery Measures Agreements (Ermas) introduced due to the collapse in demand caused by the coronavirus crisis.
Under the terms of Ermas, the DfT has taken on the financial liabilities of rail firms and is paying them up to 1.5 per cent of their pre-pandemic operating costs.
This will leave taxpayers with an £8 billion bill for the current financial year, with a further £2.1 billion allocated for 2021/22. Ermas also contain provisions to allow operators to walk away from franchise contracts if a deal can be reached on additional payments.
Having reached this stage, FirstGroup is now negotiating with the Government over the terms of directly-awarded management contracts for Avanti West Coast and SWR.
These would see it continue to run services when Ermas expire for SWR in March 2021 and Avanti West Coast in March 2022.
FirstGroup chief executive Matthew Gregory said: “We welcome this agreement, which marks a further evolution of the contractual framework for our SWR and Avanti train operating companies, both in the context of providing resilient services throughout the coronavirus pandemic and also a more sustainable long-term approach.”
