SW Trains red alert amid franchise row

Stagecoach today warned its South West Trains could crash "significantly" into the red next year as a huge row blew up with the Department for Transport over the revised terms of its franchise.

Stagecoach has run Waterloo-based SWT since privatisation but signed up to a much more onerous contract with the Department from 2007. It said it would pay back £1.2 billion in excess profits over 10 years to the Treasury but still make profits of up to £20 million a year.

However, it today revealed it is in dispute over the fine print of the contract.

At issue is SWT's revenues which, if they come under pressure, trigger a handout from the Government from 2011. But Stagecoach and the Department are in dispute over from when those revenue falls should be calculated.

There is further dispute over whether car park revenues - worth about £15 million a year to SWT - should be included.

Stagecoach said if the issues are not resolved, its rail business "is likely to incur a significant operating loss". The shares, down 60% since September, fell a further 7¼p to 125½p.