Stagecoach takes legal action against UK after rail bids rejected

(Reuters) - Stagecoach Group said on Wednesday it had begun legal action against Britain's Department for Transport after the company's bid to continue operating a rail route was rejected due to concerns over pensions.

The Department for Transport has asked rail franchise bidders to take on the full long-term funding risk of parts of the Railways Pension Scheme and disqualified Stagecoach's bid for the East Midlands franchise because it did not comply with that request. It also disqualified the company from bidding for the West Coast and South Eastern franchises for the same reason.

Stagecoach, which also said it was considering legal action over the other two disqualifications, estimates the liability could be well in excess of 1 billion pounds ($1.3 billion).

The transport company has operated the East Midlands franchise since its launch in 2007 and was bidding to renew a contract that expires this year.

The Department for Transport instead awarded the franchise to Abellio, a decision which Stagecoach said it was preparing to contest in a separate judicial review.

The company said it had lodged a claim at the High Court in London, alleging the Department for Transport breached its statutory duties in connection with the East Midlands franchise.

Stagecoach, which lost the contract to run trains from London to Edinburgh last year, was involved in joint bids with Alstom for the South Eastern commuter network and with Virgin Group and SNCF for the West Coast line running to Scotland.

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(Reporting by Justin George Varghese in Bengaluru. Editing by Jane Merriman and Mark Potter)