FirstGroup's share price edged up this morning after it announced a deal with the Department of Transport (DfT) to operate the First Great Western rail franchise all the way through to 1 April 2019. The deal could be extended by a year at the DfT's discretion.
After losing a series of bids for rail franchises last year, the deal will come as welcome news to FirstGroup. Last year, the operator lost the contract to operate ScotRail and its franchise bid for the newly privatised East Coast mainline.
The company, which carries 99m passengers a year, promises 9,000 additional seats per day across the franchise until December 2018. New carriages - 369 in total - will be rolled out as part of the Intercity Express Programme. A further 58 four-car electric trains will be introduced for Thames Valley services.
The group is promising quicker journeys from Penzance to Paddington, Oxford to Bristol and London to South Wales.
Commenting on the deal, Tim O'Toole, FirstGroup's chief executive, said:
As the proud operators of this important franchise, we will be using our unrivalled knowledge and experience of the network to help deliver significant upgrades over the next few years, in particular, the introduction of new trains as the mainline is electrified.
Transport secretary Patrick McLoughlin was also bullish on the future benefits for passengers. "I am determined that passengers in the West, Thames Valley and South Wales get a railway that is fit for the 21st century. This is a fantastic deal which will give them more seats, more services and brand new fleets of modern trains".
Passengers will enjoy the benefits of £30m of investment to upgrade car parks and rail stations. FirstGroup will pay the government £68m to operate the franchise.
Earlier this month FirstGroup announced new chairman Wolfhart Hauser will take over from John McFarlane in July. Hauser will be the firm’s third chairman in less than 18 months.