FirstGroup shares were up almost two per cent after the firm announced it had won the South West trains franchise as part of a partnership to "transform the way that the railways work".
The department for transport (DfT) announced this morning the award of a seven-year franchise to a joint venture run by the FTSE 250 transport group together with Hong Kong metro operator MTR.
Current operator of the franchise Stagecoach will run its final service on 19 August.
At the centre of First MTR South Western's victory over incumbent franchisee Stagecoach was a pledge for a more integrated approach to running the network, the DfT said.
The new franchisee will oversee £1.2bn of investment that will lead to passengers benefitting "from more space and faster rail services".
Grayling said: "First MTR South Western Trains Limited will deliver the improvements that people tell us they want right across the South Western franchise area, from Bristol and Exeter, to Southampton and Portsmouth, to Reading, Windsor and London."
What is being promised?
|22,000 extra seats into London Waterloo each morning peak and 30,000 extra seats out of Waterloo each evening peak|
|A fleet of 90 new trains, providing more space for passengers on Reading, Windsor and London routes.|
|Refurbished existing trains with charging sockets, new seat covers and refurbished toilets.|
Faster journeys across the network.
Earlier first and later last trains between London and
|More Sunday services across the network, with many routes having the equivalent of a Saturday service after 1pm.|
|New Delay Repay compensation, including for delays of 15 minutes or more, and with automatic claims for smart card season tickets and advance purchased tickets bought in advance through their digital channels.|
|New smart card, automatically offering the cheapest walk-up single or day return fare.|
|New Flexible Season Tickets, offering a discount for passengers travelling fewer than five days a week.|
|Season, single and return tickets on Smart Cards across all of the franchise.|
|New discount for purchasing 12 consecutive monthly season tickets|
|New Student Connect smart ticket for 16 to 18 year-olds, offering one-third off weekly or longer tickets, and further term-time discounts for under 16s.|
|Mobile phone barcode tickets will be available on the network for the first time.|
|Investment to make Southampton Central station a destination fit for the community it serves, with a new look entrance, improved retail, and better facilities for passengers.|
|Free Wi-Fi at all stations and on-board mainland trains.|
|Investment in station improvements including refurbished waiting rooms, additional seating, improvements for step-free access, and 60 electric vehicle charging points.|
|At least 1,500 new car park spaces.|
|Over 40 per cent reduction in energy use at stations and depots.|
|Better connections for the Island Line, and work with the Isle of Wight Council and other local bodies to develop a business plan and option for a more sustainable long-term future.|
What the franchise winners said
FirstGroup chief executive Tim O'Toole said: "We are delighted that our partnership with MTR has been selected by the DfT to run the South Western rail franchise, a key part of the country's railway network which millions of people rely on every day.
"Our successful bid will deliver the tangible improvements that customers and stakeholders have told us they want from this franchise.
Passengers can look forward to new and better trains, more seats and services, quicker journey times, improved stations and more flexible fare options.
Jeremy Long, European business chief executive of MTR said: "MTR is known across the world for the excellent quality of its rail services, and we look forward to working with FirstGroup to provide a best-in-class travel experience for passengers in London and the South West.
"Together we will deliver a major programme of upgrades, including improvements to both rail services and customer experience, for passengers travelling across the South Western network."