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FirstGroup plc & Stagecoach Group plc Shortlisted For TransPennine Express Franchise

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Railway trainShares in FirstGroup (LSE: FGP) and Stagecoach (LSE: SGC) rose modestly in early trade, by around 1%, on the news that the transport operators have both been shortlisted by the Department for Transport for the TransPennine Express rail franchise.

FirstGroup has operated the First TransPennine franchise since 2004, due to end on 31 March 2015, while the company is in talks with the Department of Transport to continue operating the franchise until February 2016 when the new contract will begin, for a duration of around seven to nine years. FirstGroup managing director Vernon Barker stated: “First TransPennine Express now carries 26 million passengers a year, twice as many as at the start of the franchise and we recently introduced new, longer, electric trains on the Anglo-Scottish routes which provide an improved timetable and increased capacity… We look forward to reviewing the contract details and submitting a compelling and value for money bid which meets the needs of taxpayers as well as customers and businesses along the route.”

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Meanwhile, Stagecoach has been shortlisted to receive an Invitation to Tender by the Department of Transport, with a spokesman commenting: The TPE rail franchise is a key part of the North of England’s infrastructure, supporting economic growth and connecting communities… We look forward to engaging with local people and other stakeholders to develop a package of ambitious and robust proposals that will improve services and deliver better value for money to passengers and taxpayers.”

The TransPennine Express route covers inter-urban rail services across the north of England, including direct connections between the major cities of Liverpool, Manchester, Leeds, Sheffield and Newcastle, among other routes. Recently, representatives from these five cities formed an alliance calling for better access and faster links between these Northern hubs, a plan supported by Chancellor George Osborne who has previously called for a “northern global powerhouse”.

With the plans poised to become central to the Chancellor’s Autumn Statement, the successful bidder of the TransPennine Express franchise could be set to benefit greatly. In the meantime, Stagecoach shareholders are collecting a yield of 2.7%, while FirstGroup is forecast to pay one of 1.6% next year.

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Sam Robson has no position in any shares mentioned. The Motley Fool has recommended Stagecoach Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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