Southern Rail owner loses key Euston routes

Under-fire Southern Rail operator Go-Ahead Group’s woes deepened today as it lost a major chunk of its business running trains out of London’s Euston station.

Go-Ahead has run the London Midland franchise since 2007 in combination with France’s Keolis under the Govia banner, owning a 65% stake in the business.

But Govia has been snubbed by the Department for Transport to retain the contract in favour of a joint venture between Holland’s Abellio and Japan’s Mitsui, which will take over the running of services from November.

Shares in Go-Ahead fell 3%, or 46.4p, to 1754p as it said it was “disappointed” with the decision.

The new franchise owners are promising to invest nearly £1 billion in services, including 225 new carriages for London services and mobile and laptop-charging points on all services by 2021.

The snatching away of the franchise comes in the wake of a traumatic period when Govia’s clash with the unions over driver-only trains caused a wave of strike actions and sustained misery for hundreds of thousands of commuters.

Although full-scale strikes have ceased, unions Aslef and the RMT only ended an overtime ban by staff at the end of last month.

Transport Secretary Chris Grayling said the new franchise operators would improve “the whole travelling experience”.

But Liberum analyst Gerard Khoo said the latest decision is “unlikely to dispel concerns that the group is being penalised for the problems at Southern”.

The analyst believes the fears are unfounded as Govia has just been short-listed by the DfT to bid for the Southeastern franchise, but said the loss was “potentially more negative for sentiment”.

A DfT spokesman said the Southern issues had no influence on today’s decision.

London Midland was the best performing of its three franchises, with passenger numbers strong and growing ahead of the wider industry, according to its June trading update. That contrasted with slowing passenger growth on Southeastern and a 4% fall on strike-blighted Southern.

It is understood Go-Ahead has yet to receive feedback from the DfT on why its bid foundered, although it is likely to learn more in the next fortnight.