GNER first quarter profits soar to $14.2m

GNER has become the latest group to stoke worries of an accelerating gravy train on the railways as the intercity carrier operating out of King's Cross said profits soared 30% in the first three months this year.

Filings in Bermuda by parent company Sea Containers reveal GNER made profits of $14.2m (£7.7m) in the first quarter, its last trading period prior to the start of the new franchise on the East Coast Main Line which has extended its tenure for 10 years.

During the new franchise GNER has pledged to pay back £1.3bn in excess profits to the Treasury.

But the Sea Containers filings reveal that it believes that, despite this, GNER can make even more.

In a statement, Sea Containers said: 'From May, the new franchise came into force which initially will result in a reduction in profitability of about one third.

'However, revenue growth should allow profits to rise to old franchise levels and better. If revenue is higher than in the base case assumptions [in GNER's business plan], GNER's profits will be higher.'

Its profit rises come after a series of earnings leaps at other train operators which, under new franchise arrangements, are being given regional monopolies.

National Express, Britain's largest train operator, said rail profits were up by more than 70%. Stagecoach has told City analysts they should increase profit forecasts for South West Trains and its Virgin Rail joint venture by around 20% or about £10m.

Last week, FirstGroup said its rail profits had soared 35% last year. The rail business is in a current merry-go-round of licence renewals including three of the potentially most lucrative services.

FirstGroup, as the incumbent operator at Paddington, hopes it will land the expanded Greater Western franchise, while the cross-London Thameslink service and a new Integrated Kent franchise - including high-speed services into the new international terminal at St Pancras - are wide open.