Northern rail franchise delayed

The launch of the new Northern rail franchise could be delayed until next spring because the Strategic Rail Authority and its preferred bidder, a joint venture between Serco and the Dutch state railway NedRailways, have unresolved contractual issues.

The launch of the new Northern rail franchise could be delayed until next spring because the Strategic Rail Authority and its preferred bidder, a joint venture between Serco and the Dutch state railway NedRailways, have unresolved contractual issues.

The new franchise, one of the biggest in the country with revenues of £500m a year, 1,600 route miles and 475 stations stretching from Manchester to Newcastle, had been due to go live on 17 October. But Arriva and First Group, who operate the two individual franchises being merged into Northern, were asked last Friday if they could continue to run trains for an extra one to six months.

Bob Davies, Arriva's chief executive, said he had been surprised to get the call from the SRA last week, so close to the planned handover date to Serco and NedRailways.

Neither the SRA nor its preferred bidder would elaborate on what the unresolved contractual issues were, but both said the aim was still to launch the franchise before the end of the year.

Mr Davies said Arriva planned to make up for the loss of the Northern franchise by further aggressive expansion into overseas rail and bus markets. It already has operations in seven countries outside the UK including the Netherlands, Italy, Portugal, Spain and Germany, and Mr Davies said overseas turnover could double from £500m now to £1bn a year within three or four years.

Arriva is poised to become Germany's biggest private train operator and it is also looking to expand into European Union accession states such as Poland, Hungary and the Czech Republic.

Operating profits for the first six months were up by 7 per cent to £60m thanks to Arriva's rapid international expansion and growth of its bus business in London, where it has 20 per cent of the market. Arriva plans to introduce more "bendy-buses" to replace the old Routemasters, but Mr Davies said it would not benefit from the extension of the congestion charge westwards.