First Group renegotiates West Coast rail deal after just 1 year
The Aberdeen-based firm took over from Virgin in December 2019
Last updated 14th Dec 2020
Scotland's FirstGroup has renegotiated its deal to run the Avanti West Coast train service from Glasgow to London almost a year to the day since it took over from Virgin Trains, blaming the coronavirus pandemic for a collapse in demand.
The Aberdeen-based company will continue to operate the trains until at least March 2022 after talks with the UK Government as part of Emergency Recovery Measures Agreements.
FirstGroup says the Department for Transport 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''
But a contribution of £33.2 million is required by FirstGroup to end South Western Railway's (SWR) deal.
Under the terms of Ermas, the DfT has taken on the financial liabilities of rail firms and is paying them up to 1.5% 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 talk away from franchise contracts if a deal can be reached on what additional payments they should make.
Will traveller's notice any change?
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 Avanti West Coast services on a contract basis until 2026.
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.
"These new directly-awarded management contracts will focus on passengers and operational performance, with a more appropriate balance of risk and reward.
"We look forward to working constructively with the DfT to make this a reality, and to use our expertise and understanding of the needs of our customers to deliver improvements that we know passengers want.''
He said FirstGroup is operating around 90% of pre-pandemic rail services, adding: "Passengers and employees alike can be confident that our trains are safe.''
The group saw its loss before tax narrow to £100.1 million, from £187.1 million in the first half of last year. Revenue dropped more than 12% to £3.1 billion.