TRANSPORT group Arriva’s £28m investment into its Merseyside bus operation will go ahead, despite fears over soaring costs and slowing revenues.
The company, which is Merseyside’s biggest bus operator, warned yesterday that the dire state of the economy made it “impossible” to make confident forecasts over passenger revenues in the near future.
Arriva is facing pressure from a £60m hike in fuel costs and slowing rail revenue growth, and is ready to take “contingency action”.
Profits rose 30% to £150m last year – boosted by the first full year of income from CrossCountry rail franchise – but the group expects a “demanding” year ahead.
Chief executive David Martin said: “Though macro-economic uncertainty makes it impossible to predict short-term passenger revenues with confidence, we stand ready to take contingency action wherever practicable.”
CrossCountry saw revenues grow 11.2% last year, but Government subsidies reduce in subsequent years of the franchise.
Arriva must lift franchise revenues by around 10% this year to maintain profits. But growth has slowed to below 2008 levels in recent weeks, with network disruption adding to the headaches.
The UK bus business, which operates services in cities including Liverpool, London, Leeds and Newcastle, produced a “robust” 13% increase in operating profits to £99.3m. Fuel pressures are likely to ease in 2010, the firm said.
Last month, Arriva said it would spend £28m in Merseyside buying 199 new vehicles to operate across its network. The firm’s experience of previous recessions signalled that regional demand for bus travel would be “relatively resilient”.
In mainland Europe – where profits and revenues have more than doubled since 2004 – Arriva expects acquisitions and new orders will “go some way” towards offsetting the recession, although the pace of new contract wins slowed last year.
Mr Martin added that public transport was a “long-term business with deep roots” despite the current challenges.
“Even against the current background of economic downturn and financial sector crisis, attractive, integrated public transport networks are increasingly seen as a kingpin for long-term prosperity, all over Europe,” he said.
But Investec analyst Joe Thomas said the outlook was “mixed”.
“While bus volumes should be resilient, we are concerned over the prospect for rail, where growth has slowed, and Continental Europe, where contract wins have weakened,” he said.
