Rail struggles but times are good on the buses

Oct 26 2009 by Iain Laing, The Journal

HEAVYWEIGHT UK firms will have their turn in the spotlight this week after a largely positive run of third quarter results in the United States.

National Express has been grabbing the headlines with the saga of its on-off takeover and profit warning, but rivals Sunderland-based Arriva and Newcastle-based Go-Ahead should provide less drama with their own updates next week.

Trading conditions are nonetheless tough, as shown by a 30% fall in rail profits at the half-year stage as the economic downturn slowed growth in passenger revenues.

Arriva needs passenger growth of 10% at its CrossCountry franchise to maintain 2008 profits, although this came in at just 1.8% in the first half.

Its UK bus operation however performed strongly despite headwind of a £60m rise in fuel bills this year.

Meanwhile Go-Ahead, which operates the Southern, Southeastern and London Midland franchises, does not expect any “significant“ growth in rail during the year to June 2010.

Falling subsidy support and cuts to regulated fares on two franchises linked to the Retail Prices Index inflation benchmark – currently negative – will also impact on the business.

Although commuter rail revenues are suffering, its bus division overcame higher fuel, pension and accident claims costs with record annual profits of £66.2m.

The firm’s 3,500 buses carry an average 1.6 million passengers every day across London and the South East, the North East, and Oxford.