Go-Ahead slumps after rail franchise setback

Go-Ahead, the train and bus operator, was dealt a major blow yesterday after being kicked off the Thameslink route and told it would not be allowed to bid for the new Greater Western franchise.

Go-Ahead, the train and bus operator, was dealt a major blow yesterday after being kicked off the Thameslink route and told it would not be allowed to bid for the new Greater Western franchise.

Shares in the Newcastle-based company fell 7 per cent on news of the twin setback, wiping more than £50m from its stock market value.

The Strategic Rail Authority (SRA), which made the decision, is understood to have taken into account the poor track record of Go-Ahead in running the Thameslink service between Bedford and Brighton, one of the worst performing commuter lines in the country.

SRA officials are also thought to have been influenced by the highly public criticisms of the organisation's new franchise agreements made by the chief executive of Go-Ahead's rail division, Keith Ludeman.

This is the second time that Go-Ahead has lost a franchise. It failed as the incumbent operator to keep Thames Trains, which was awarded last year to FirstGroup.

Go-Ahead said it was "surprised and disappointed" at the SRA's latest decision, pointing out that Thameslink's operating performance had greatly improved recently despite a blockade at King's Cross which has prevented it running through-services. Go-Ahead added that it would be seeking "urgent feedback" from the regulator to understand why it had been rejected. An SRA spokesman replied that it "did not cut the mustard".

Go-Ahead has run Thameslink since rail privatisation in 1996 through its Govia joint venture company with the French. Last year it made a £16.4m profit from the franchise on revenues of £112m. Govia had expected to pre-qualify to bid for a new six-year contract covering an enlarged Thameslink-Great Northern franchise which starts in April next year.

However, the SRA has decided to exclude Govia and shortlist five other bidders - National Express, Firstgroup, Stagecoach and two consortia, one involving John Laing and Hong Kong's MTR and the other formed by Danish Railways and the freight operator English, Welsh and Scottish Railways.

The failure to pre-qualify for the new Greater Western franchise, which will take in Thames Trains and begins operating out of Paddington next April, was also a serious setback.

Unless Go-Ahead wins the new Integrated Kent franchise, which is due to be awarded this autumn, then it will be reduced to one rail business - Southern, which operates commuter services to the south coast from London Victoria. SRA sources suggested that if Go-Ahead wanted to stand a chance of winning the Kent line it would have to demonstrate that it has "gripped what the new franchise arrangements are all about".

Mr Ludeman, who is also chairman of the Association of Train Operating Companies, told a recent seminar that he would like to take a "strimmer" to the SRA's new model contracts. The contracts specify in minute detail what is required if carriages are, for instance, defaced by graffiti, through what are called "key performance indicators".

One source said: "Go-Ahead does not seem to have grasped the culture of the new model contracts and there is a question about the extent to which that permeated their bids. There was a concern that if they pre-qualified and won the two new franchises would they grip it."

The SRA has pre-qualified three bidders for the Greater Western franchise. These are the incumbent operator FirstGroup, National Express and Stagecoach, which currently operates South West Trains and owns a 49 per cent stake in Virgin Trains.