South Western Railway could lose franchise after £137m loss

South Western Railway's auditor said there was "significant doubt about its ability to continue as a going concern"

A rail firm has said it could lose its franchise after declaring a £137m loss.

South Western Railway (SWR) said it was in talks with the government over the future of the contract, which is due to expire in 2024.

The operator, owned by FirstGroup and Hong Kong-based firm MTR, said it had been affected by issues including strikes and infrastructure reliability.

SWR services were disrupted for 27 days in December by the latest in a series of strikes over the future of guards.

RMT union members have staged a series of strikes over the future of guards

SWR's accounts, for the year ending 31 March 2019, showed a loss after tax of £136.9m.

It said talks with the DfT could lead to a new contract or "termination of the [current] contract within the next 12 months".

SWR said its owners had set aside funds for the "maximum unavoidable loss".

'Chaotic collapse'

A spokesman for the train operating company said: "SWR's recent performance has been affected by issues including infrastructure reliability, timetabling delays and industrial action.

"We continue to be in ongoing and constructive discussions with the DfT."

The RMT rail union said the firm should be stripped of the franchise immediately to avoid a "chaotic collapse".

RMT members have been involved in more than two years of strikes over a move by SWR to allow drivers to operate train doors.

Analysis

By Paul Clifton, BBC South transport correspondent

SWR has not been balancing the books for some time. After two years of strikes by guards in the RMT union, that isn't a surprise.

New trains are late, the infrastructure has been unreliable and performance has been falling for years. This railway is not doing well and most of its promises to passengers have not been met.

But here, in black and white for the first time, is an acknowledgment by the new managing director, Mark Hopwood, that the company could fail. Operations could be transferred to a government controlled body.

I don't think it's the most likely outcome. A new deal with revised terms is more likely. But what's clear is that the option of last resort is being actively considered.

A DfT spokesperson said: "We monitor the financial health of all our franchises closely and we expect them to meet their contractual obligations.

"The government will shortly bring forward a White Paper containing reforms recommended by the Williams Review that will put passengers first, end the complicated franchising model and simplify fares."

SWR operates routes between London Waterloo, Reading, Bristol, Exeter, Weymouth, and Portsmouth, as well as Island Line on the Isle of Wight.

FirstGroup and MTR were awarded the franchise in August 2017, after outbidding previous operator Stagecoach.