UK group agrees deal to sell c2c franchise to Italian state railway




National Express Group has agreed a £70m deal to sell its c2c franchise to Trenitalia, the Italian state railway company.

The deal marks the departure of National Express from the UK passenger rail market. The group was once the market leader, with nine franchises, but its market position has steadily eroded. London commuter operator c2c has been the sole survivor of its once mighty UK rail portfolio since February 2012.

While not ruling out participating in future UK rail contracts, National Express sees better opportunities elsewhere. The group has achieved significant growth in North America and mainland Europe.

National Express began a new 15-year deal for c2c in November 2014 and had not been looking to offload the operation. However, Trenitalia made its offer following initial discussions about bidding jointly for rail franchises.

The deal is a breakthrough in Trenitalia’s plans to expand in the UK rail market. In December 2015, Trenitalia became the first new entrant to be awarded a ‘PQQ Passport’ by the Department for Transport.

Trenitalia has decided to invest in UK rail on the basis of the market’s fundamental strength and potential for growth, particularly in light of transport secretary Chris Grayling’s recently announced vision for reform (PT149). This vision will see train operators carry greater infrastructure exposure in future franchises.

Commenting on the deal, Barbara Morgante, CEO of Trenitalia, said: “We see significant chances to invest in UK rail and this in principle agreement with National Express allows us to foster these ambitions … We are confident that British customers will benefit from our skill and capabilities developed in the highly competitive Italian market.”

Completion of the c2c deal is conditional upon final consent from the DfT.


Established players face eager new rival

The arrival of a fourth state-owned railway company in the UK passenger rail market looks set to intensify competition for franchises.

With the purchase of c2c from National Express, Trenitalia will join Deutsche Bahn (Germany), SNCF (France) and NS (the Netherlands) in the UK rail market. Their subsidiary companies are already involved in running the majority (11) of the UK’s 20 passenger rail franchises.

Commenting on the deal, Gerald Khoo, transport analyst at Liberum, said: “We see the exit of National Express from, and Trenitalia’s entry into, the UK rail industry as a negative for the remaining listed groups. In future franchise competitions they will now face a more active bidder than National Express, and one which is likely to be more ambitious in building a portfolio of franchises.

“Without the short-term discipline imposed by institutional shareholders, this points to Trenitalia being a more aggressive competitor. It could also prove to be a highly credible bidder for new franchises, with more infrastructure experience and inheriting the excellent operational track record of the c2c franchise.”


This article appears inside the latest issue of Passenger Transport.

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