Recession takes toll on bus and train operator

Nov 5 2009 by Iain Laing, The Journal

FIRSTGROUP has seen profits dragged down by the recession both in the UK and in the US for its Greyhound intercity coach business.

The Dallas-based operation posted a 71% slide in operating profits to £14.4m as revenues slumped in the face of the US economic downturn.

While trends have stabilised in recent months, Greyhound was the biggest factor in a 44% drop in group pre-tax profits to £30.3m.

An increase of £74m in fuel costs in the current financial year also hurt FirstGroup, although it expects this to reverse in 2010/11. It has axed more than 4,000 jobs in a bid to save £200m in the full year.

The impact of the higher fuel costs was felt on the company’s UK bus division, which saw profits fall 15.3% to £50.8m.

In UK rail, operating profits rose 5.2% to £50.8m after like-for-like passenger revenues increased by 1.7%.

The company has also been affected by stronger demand for advance purchase and other discounted tickets, along with weaker sales of first-class fares.

The company, which is the UK’s largest rail operator with 280 million passengers a year, is currently receiving support from the Government for both of its London-based passenger rail franchises, First Great Western and First Capital Connect.

The division’s subsequent profits improvement drew an angry response from TSSA rail union leader Gerry Doherty, who said it made more sense to spend the money on cutting fares on publicly owned franchises.

He added: “It is the economics of the madhouse to pay millions of pounds to private rail operators who are then charging passengers the highest fares in Europe.”

Chief executive Moir Lockhead said the company had demonstrated its ability to flex its business in line with changing market conditions.

He added: “After a resilient performance in the first half of the year, overall trading remains in line with our expectations.”