ANALYSTS welcomed transport group Arriva’s “routine” trading update, despite fears that rail passenger revenues are facing a slowdown in growth.

The bus and trains group, which provides more than 70% of Merseyside’s bus services, said its UK bus division continued to trade strongly in the five months to the end of May, after revenues rose 5.2% and mileage was cut back by 3.3% to control costs.

Earlier this year, the group maintained its commitment to a £28m investment in 199 new buses to improve its Merseyside fleet.

Arriva’s mainland Europe operations, which take in 12 countries, achieved a 10.4% increase in revenues, including 6.7% from acquisitions.

But the board warned that slower passenger revenue growth from its two UK rail franchises will hit earnings in the first half of this year.

Revenues rose in the Wales and CrossCountry train services by 8.7% and 2.4%, respectively, but the Sunderland-based group said the rate of growth had eased.

And the company said its CrossCountry business is unlikely to maintain the same level of profitability as in 2008. The company said the business would have needed to average 10% growth on the year to match year-earlier earnings.

However, the statement revealed that cost-cutting measures include plans to fix fuel payments in a bid to halve costs.

It said fuel costs had risen £60m for the year, but it said it plans to implement a hedging policy in order to cut costs by £30m in 2010. Early trading losses on Arriva shares came back slightly from the stock market opening yesterday.

Overall, the shares have shed 36% of their value in the past year, giving the company a market capitalisation of about £821m.

One analyst said: “The statement was fairly routine, some softening in trading, though not unexpected.” He added that the company is looking at a further slowdown in the UK and will experience more cost pressure, but he maintained a “hold” rating on the stock, with a 45p earnings-per-share target.

Arriva chief executive David Martin said: “I remain confident the group will continue to demonstrate the delivery of long- term value to shareholders.”