Join our community of smart investors

FirstGroup and Go-Ahead extend franchise agreements

The government offered extensive support for the troubled sector last week
March 30, 2020

FirstGroup (FGP) and Go-Ahead (GOG) have both had existing franchise contracts extended by the Department for Transport (DfT), a week after falling passenger numbers prompted the government to suspend the rail franchise system and assume all revenue and cost risk threatening operators for six months.

FirstGroup will now manage the Great Western Railway until 31 March 2023. Go-Ahead, which operates the Southeastern franchise through its Govia subsidiary, will now see its deal run until 16 October 2021, with the option for this to be extended until 31 March 2022. Both companies have warned of the severe toll of coronavirus on passenger trips, with FirstGroup’s First Rail division recording as much as a 90 per cent drop in turnover in March. 

Both deals will run alongside the government’s Emergency Measures Agreement for at least half a year, under which management ees will be set at a maximum of 2 per cent of the franchise’s cost base before the crisis commenced. Last week, transport minister Grant Shapps told parliament that this arrangement would “incentivise operators to meet reliability, punctuality and other targets”. Go-Ahead said today that around 90 per cent of its revenues are now shielded from changes in underlying travel demand.