Talks over National Express rail contract break down

Jun 29 2009 by Christopher Knox, The Journal

CRUNCH talks between National Express and the Department for Transport (DfT) over the future of the East Coast Main Line have stalled, it has been reported.

Debt-laden National Express – which is set to give an update to investors on Wednesday – is in discussions with DfT over amending the terms of the east coast train deal.

But it has been reported that talks collapsed when the department stood by its refusal to alter the deal.

National Express won the franchise two years ago before the onset of the recession and the current arrangement means it must pay the Government £1.4bn by 2014.

A resolution is crucial for the beleaguered firm but it is understood that while the two sides had been close to a deal to replace the existing franchise, the talks broke down.

A spokeswoman for the department said: “As we have made clear on numerous occasions we do not renegotiate franchises.”

It is thought initial talks involved National Express continuing to run the trains for an agreed fee, while officials would retain the right to re-let the contract.

Sliding revenues on the line have led to speculation that National Express could walk away from the deal.

This would be a desperate move and could trigger defaults on its other franchises.

The rail and bus operator is also understood to be mulling a £400m cash call from investors, but it is believed that this would be dependent on reaching a settlement with the DfT.

National Express, which said it would not comment on media speculation, received a boost two weeks ago with extra breathing space from tougher terms on its £1.2bn debts until the end of this year. But despite more positive trading in its UK coach and bus arm as more people choose to holiday at home, the group also faces a tough situation in recession-hit Spain.

It is understood it will update shareholders on the East Coast Main Line situation next month.