National Express today revealed it slumped into the red in the first six months of the year as it lost more than £20 million on its soon-to-be nationalised East Coast rail line.
The Birmingham-based group reported interim pre-tax losses of £48.1 million against profits of £52.4 million a year earlier as it also set aside a hefty sum to cover its exit from the East Coast rail franchise, which is being taken back into Government hands later this year.
The news adds pressure to embattled National Express as its faces crippling strike action on the East Anglia line in a two-day walk out starting today.
It is also the focus of a potential bidding battle as suitors circle the troubled group.
National Express has made provisions of £54.7 million surrounding the East Coast route from London to Scotland, which it walked away from earlier this month after failing to renegotiate a deal with the Government.
Re-nationalisation of the line is expected in the second half, according to National.
The firm stressed today that, having taken legal advice, it was "confident" the Government could not also seize its East Anglia and c2c franchises and would fight any moves for cross-default.
National Express is fighting battles on a number of fronts after a torrid past few weeks that have also seen its chief executive Richard Bowker quit to take up a new rail job in the United Arab Emirates.
As well as the rail strikes over pay and conditions - which could extend to six more days in the coming weeks if the dispute is not resolved - National Express is also fending off takeover approaches.
Its first would-be buyer, larger rival FirstGroup, walked away last week, citing "uncertainties" surrounding the business following the East Coast exit.
National is now being eyed by another transport group, Stagecoach, alongside a consortium led by National's shareholder, the Spanish Cosmen family, and private equity giant CVC.
Birmingham-based National today said it had to concentrate first and foremost on a plan to get the group back on track and refinance its £1.2 billion debt mountain.
It said it was "evaluating whether value can be achieved for shareholders through third party approaches to acquire the group".
But added: "It is important that these are fully assessed for value and deliverability. However, it remains important for the group to retain its options to refinance and deliver these priorities."
On an underlying basis, National said it made half-year profits of £55.7 million, a drop of 42% on the year before.
It is suffering from slower business across its rail business, with lower passenger numbers and fares amid the recession leaving revenue growth at 1%.