Shares of Perth-based transport giant Stagecoach fell as much as 14% on Tuesday, the day after UK Transport Secretary Chris Grayling said the Stagecoach-led Virgin Trains East Coast rail franchise is facing an “urgent” cash crisis.
Grayling said the Stagecoach-Virgin East Coast franchise will be able to continue in its current form “for a matter of a very small number of months and no more.”
Grayling said his department “issued the franchisee with notification that the franchise had breached a key financial covenant.”
The Transport Secretary said this means he will have to “in the very near future” end the franchise contract and put in place “a successor arrangement” to operate East Coast.
Grayling said one option even being considered is that East Coast could be directly operated by the Department for Transport (DfT) as an operator of last resort.
But Grayling conceded: “At this stage, one of the options is to consider the possibility of Stagecoach continuing to operate services on the East Coast under a very strictly designed and short-term arrangement.”
Stagecoach CEO Martin Griffiths hit back, saying: “Contrary to much misinformed recent comment, we have neither walked away from the East Coast franchise nor asked for, or received, any special treatment.
“We have accepted our share of risk agreed with the Government at the time the franchise was let.
“At all times, we have acted with professionalism and integrity by fulfilling Stagecoach’s obligations to fund the franchise, even in challenging times and with changed circumstances.
“We are also continuing our discussions with the Department for Transport about new contractual arrangements to facilitate the transition to the planned new East Coast Partnership in 2020.”