Key rail bidders question new structure

Roger Salmon, the rail regulator: bidders believe the train operators should control track, stations and signalling, too

Two key bidders for the flagship of the Government's rail privatisation programme yesterday questioned fundamental principles of the way the new railway system is to be run.

As the bid deadline for the franchises for running the first three passenger rail services closed, Sea Containers, the shipping group, said that assets run by Railtrack - track, signalling and stations - should be put back under the control of the train operators.

Stagecoach, the quoted bus company which pre-qualified for all three franchises, also said it was concerned about being unable to control track and signalling, and saw the next few months as an opportunity to negotiate a solution.

Their attitudes are bound to embarrass Sir George Young, the transport minister, as the Government continues to defend the structure of the complex rail privatisation against political and business attacks.

Railtrack is slotted for a pounds 2.5bn flotation next spring, and the Government is fighting to keep to the timetable.

Sea Containers, one of more than six groups believed to have pre-qualified by yesterday's deadline, said it was interested in two of the franchises - Great Western Trains and South West Trains. It was not interested in the third franchise, LTS Rail, which operates services from London to Southend and Tilbury.

In a surprise announcement, Sea Containers said it would not bid for South West Trains alone. While Great Western could be run as a separate entity, South West was burdened with heavy loss-making short haul commuter services.

James Sherwood, president of Sea Containers, said "the great unknown" was Railtrack. "It is worrying for the train operator not to have the track, signalling and stations used by it under its direct control."

If Sea Containers' bid were successful it would try to lease these assets "on a full repairing basis because maintenance and operation could then be assured at the lowest cost".

Brian Cox, who heads Stagecoach's rail interests, said: "We would like to see Railtrack decentralised."

However, the Office of Passenger Rail Franchising, which is overseeing the bid process, is unlikely to agree to lease Railtrack assets to the train operators or see the structure broken up. Sea Containers' move is likely to be seen as a sighting shot to win more limited concessions from Railtrack.

Opraf yesterday refused to reveal bidders, but other bidders are thought to include London & Continental, a consortium which includes National Express and Virgin Group.