Go-Ahead is prepared to invest up to pounds 50m in Thameslink and a further pounds 10m in its Thames Trains subsidiary but only if both franchises are lengthened by about five years. The two seven-year franchises expire in 2004.
The group also indicated yesterday that it wanted Michael Grant, the Rail Franchising Director, to allow it to raise prices to help pay for improvements to the two rail franchises.
Go-Ahead's chairman, Professor Sir Frederick Holliday, said: "We must recover the cost of our investments by means of a longer franchise period based on realistic pricing. Cheap travel is not usually cheerful."
The extra investment in Thameslink would pay for 20 new trains and improvements to signalling and track layout to alleviate the chronic congestion on the route until the pounds 700m Thameslink 2000 upgrade is complete in 2006.
Passenger numbers on Thameslink has been growing at rates well in excess of 10 per cent and on some services, such as St Albans to King's Cross, passengers have to travel before 7am to guarantee getting a seat.
On Thames Trains, Go-Ahead is proposing extra rolling stock so it can provide a "turn up and go" service at peak periods for passengers travelling from Oxford to Paddington.
Chris Moyes, Go-Ahead's commercial director, said the alternative to extended franchises was increased levels of subsidies to fund the improvements. Subsidies for the two franchises this year will be just pounds 800,000 compared with pounds 53.5m before privatisation. This year Go-Ahead will pay the Government just under pounds 18m to operate Thameslink and receive just over pounds 18m subsidy to run Thames Trains, but by 2004 it will be receiving nothing for Thames Trains and paying pounds 32m a year to operate Thameslink.
The plea for franchise extensions came as Go-Ahead reported a 12 per cent increase in pre-tax profits to pounds 41m for the year to 3 July on sales of pounds 496m and a 15 per cent increase in the total dividend to 11.5p.
Mr Moyes said Go-Ahead remained keen to increase its UK bus interests and expand further into Europe, but he ruled out following FirstGroup, National Express and Stagecoach into the US bus market.