London and Birmingham Railway, a Govia company, has been awarded the contract to run the West Midlands franchise from November this year, with an annual government subsidy of £1.13bn ($2.26bn).
The new franchise runs until September, 2015, although the Department for Transport (DfT) says it has the right to terminate the deal after six years, should London and Birmingham fall short of requirements.
News of the deal comes as a raft of new franchise agreements is being negotiated with the DfT, with some blaming ticket price hikes on stringent repayment conditions from the train operators.
The DfT”s subsidy represents a direct grant from government, reflecting the loss-making nature of the franchise. ”This is a subsidy throughout the lifetime of the franchise,” a DfT spokesman told ABTN, adding: ”If we were not involved, it would make a loss.
”This represents the lowest subsidy available and best value for the taxpayer.”
This latest franchise combines the current Silverlink County services between London Euston and Northampton, with the West Midlands local and regional operations groups of Central Trains.
Key elements of the successful bid include an £11.5m investment in station upgrades, 37 new electric Desiro trains by July 2009, 1,033 more car parking spaces and new services, for example, two trains an hour all day between Liverpool and Birmingham on completion of the West Coast Main Line.
Annual fare rises for regulated tickets will be limited to RPI (retail price index) +1%, while unregulated fares will continue to be the responsibility of the operator. London to Northampton routes are expected to have a 3% above inflation increase per year, while other routes within the franchise will have RPI +1% fare rises.