British transport group Go-Ahead Group Plc has prepared for a potential 3 percent slump in rail passenger revenue on its routes into central London in 2009, while also cutting 500 jobs at its aviation division. Chief Executive Keith Ludeman said he was still seeing growth on the City-exposed South-Eastern franchise, but considered it possible that a recession-related slump is on the way and had cut costs accordingly - including 300 jobs.
He told Reuters 2009 passenger revenue could fall 3 percent, compared with an 8.9 percent rise in the six-month period to end December. "I think that could well happen. If you look at Bank of England forecasts, thats what they project," he said in an interview, adding that the correlation between economic forecasts and actual rail use was still unclear.
"What we have done, as a business, is to say, OK - what if things got quite difficult? ... We identified what impact that would have on the profitability of the business, and (have) taken steps to ensure that profitability is maintained," he said. Go-Ahead operates three rail franchises linking the south, south-east and British midlands to London, and accounts for 30 percent of all rail journeys in the UK.
All major rail operators are currently concerned about the impact of rising unemployment on passenger numbers during the recession - the first since the network was privatised. Ludeman said that although unemployment would have an impact, the overall recession had hit non-essential travel harder.
"Whats happened in the economic downturn has more impacted on discretionary travel, rather than the commuter network ... if you have a job, you come to work," he said. Go-Ahead shares were up 2.4 percent at 1072 pence by 1505 GMT, valuing the business at 460 million pounds. Its rivals - FirstGroup, Stagecoach, Arriva and National Express were all down. Go-Ahead also operates an extensive bus network and an aviation services division, which Ludeman said was being scaled back with the loss of 500 posts this financial year - 12.5 percent of the arms workforce.
"Thats to reflect the very substantial drop in cargo tonnage world-wide," he said, indicating that he would listen to offers for the struggling arm when conditions improved. "I think its at the bottom of a difficult period. Weve restructured the business - we hope to survive the current downturn in that industry, and when we come out well see what the options for the business are," said.
On Britains railway policy, he said the government was too keen on major schemes such as the upgrade of the cross-channel rail link in 2007, and should concentrate, instead, on smaller projects to increase capacity. The 59-year-old said it was possible the 16 billion pound ($23.5 billion) Crossrail scheme across London - due to be completed by 2017 - would not be completed in his lifetime, assuming an average lifespan of around 82 years. "Lets be honest about Crossrail. Can we actually say that this thing is fundable and will happen?" he said.
"I think certainly in my working lifetime, absolutely no chance. I think in my own lifetime, possibly," he added, when asked whether he was confident the massive project could be completed. The Crossrail railway is expected to carry 200 million passengers a year across central London from 2017, and will include links to Heathrow and Canary Wharf.
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