FirstGroup revs up for US bus routes expansion

FirstGroup, the rail and bus operator, disclosed yesterday that it is in talks to buy some of Stagecoach's American bus operations as part of a further expansion into the US public transport market.

Moir Lockhead, FirstGroup's chief executive, said that it was examining the purchase of some of the city bus services run by Stagecoach's troubled US arm, Coach USA.

Stagecoach has bus services in Washington State, California, North Carolina and Puerto Rico and Mr Lockhead indicated FirstGroup might be interested in all these.

The US is FirstGroup's fastest-growing market following the purchase four years ago of the yellow school bus company Ryder. Since the deal, Stagecoach has increased North American operating profits by 50 per cent and is now the second largest operator of school buses with a fleet of 15,500 vehicles.

About a third of the growth in the US has come from buying small family owned school bus companies and this process will continue with FirstGroup able to spend up to $100m a year on further acquisitions.

The group's UK bus business has had a huge fillip from the introduction of congestion charging in London where FirstGroup runs 16 per cent of bus services and Mr Lockhead said he was hopeful that the scheme would be extended to other cities.

FirstGroup said that since the introduction of the charge, bus journey times had fallen by 15 per cent and peak hour passenger numbers on routes into the capital had risen by 6,000. FirstGroup has already won £25m of new business from Transport for London and is aiming to negotiate more revenue by using surplus buses to run more services.

Operating profits before exceptionals and goodwill for the year to the end of March rose by 1 per cent to £216m on turnover up by 6 per cent to £2.3bn. Operating profits in FirstGroup's UK rail division, which covers the First Great Western, First Great Eastern and First North Western franchises, fell by 8 per cent to £61m after a £13m decline in net subsidies. But Mr Lockhead said that passenger numbers had grown by 4 per cent, taking traffic levels above where they were before the Hatfield disaster.

Mr Lockhead refused to be drawn on whether FirstGroup would take the Government's Strategic Rail Authority to a judicial review if it failed to be re-instated into the bidding for the new Greater Anglia train franchise. He said FirstGroup was still in detailed discussions with the SRA about how the bidding system worked and would take a decision in the next few weeks.