Arriva claims its success in winning the Cross Country franchise marks a “great day” for passengers. It’s not a bad one for shareholders either.
Based on a 5 per cent margin, victory is judged to be worth 45p to the group’s share price, but that benefit has already been surpassed by the gains made by the stock today. Arriva shares rose 55p, or nearly 8 per cent, in morning trading and within sight of January’s five-year high.
The big loser from this year’s franchise shake-up so far is National Express, and it could suffer a series of downgrades if it also misses out in the race for the new Inter-City East Coast contract currently held by GNER - for which Arriva is also in contention.
Around 9 per cent of the NE’s forecast 2008 profits are at risk, matching the uplift many now predict in Arriva’s earnings next year.
The key for Arriva is to ensure it succeeds in delivering the vast improvement in services it is promising - and far beyond routine pledges such as “help and advice for passengers who need to change trains”.
Advertisement
While plans to increase some fares every year by more than double the rate of inflation will be well received in the City, Cross Country passengers will want tangible evidence their money is being re-invested wisely.