Virgin Trains in line for aid

Virgin Trains is to get a £282m bailout from the taxpayer this year, to compensate for disastrous engineering problems on the west coast mainline which have prevented the company from running high-speed tilting trains.

The payout follows a £106m subsidy last year, greeted with anger by the Rail Passengers Council which said the payment was agreed secretly and was not in travellers' interests.

The size of the government aid package was revealed yesterday by Stagecoach, which owns 49% of Virgin Trains.

Stagecoach's chief executive, Brian Souter, said the money was justified recompense for the "collapse of the 140mph railway" which was envisaged when Virgin Trains took on its inter-city franchises.

A modernisation programme on the west coast line has run nearly £9bn over budget. Engineers have been unable to build infrastructure suitable to handle the full capability of Virgin's Pendolino trains.

In its original franchise, Virgin planned to run 125mph trains to provide a two-hour journey from London to Manchester by 2002, with speeds of 140mph by 2005. The failure of the track upgrade programme has meant it is still running services at 110mph.

Stagecoach revealed that its share of profits from Virgin Trains fell by a third to £7.2m last year.

Virgin Trains plans to bid for the Great Western franchise, which will encompass all services between London Paddington and the Thames Valley, Wales and the west country.

Stagecoach sank to a £466m loss last year after taking a £575m writedown on its unsuccessful venture into the American bus industry. Excluding the write-off, the group's underlying profits fell 12% to £146m.

Much of the American business, Coach USA, has been sold this year, reducing the group's debt from £774m to £560m.

Stagecoach's profits from buses in Britain rose 7% to £67m, helped by extra services in London funded by the mayor, Ken Livingstone.

The company disclosed that it was near to finalising a new three-year franchise for its South West Trains commuter services, which should provide profits of about £25m a year.

Mr Souter, who recently came out of retirement to try to revive Stagecoach's fortunes, said: "We're on our way back. We're feeling better about the strategy going forward and we believe we've got the right management in place."

Stagecoach's shares edged up 4.25p to 60.5p.

· The rail regulator, Tom Winsor, last night attacked Network Rail for wasting money and making insufficient cutbacks.

In evidence to MPs on the Transport select committee, he accused the not-for-profit company of replacing assets before they reached the end of their life. In some cases, engineers were wasting cash by installing new rails on rotten sleepers.

Mr Winsor said the performance of rail infrastructure was now 70% worse than it was before the Hatfield crash.