The transport secretary said South Western Railway’s performance was “significantly below expectation”
A rail firm could be taken in to public ownership should it fail financially, the government has said.
Transport Secretary Grant Shapps said South Western Railway’s (SWR) franchise was now “not sustainable in the long term”
The company recently declared a £137m loss.
It said it was involved in “ongoing and constructive discussions” with the government over remedies for the problems with its franchise.
Contingency measures include issuing a short-term contract to SWR’s owners or moving its operations to the Department for Transport, Mr Shapps said.
SWR services were disrupted for 27 days in December by the latest in a series of strikes over the future of guards.
‘No impact on operations’
Transport Secretary Grant Shapps said SWR had “not yet failed to meet their financial commitments” but the department “must prepare suitable contingency measures”.
He said poor punctuality and reliability combined with slower revenue growth has led to the operator’s financial performance being “significantly below expectation” since the franchise began in August 2017.
Mr Shapps said contingency measures would include a new short-term contract with SWR, with tightly defined performance requirements.
SWR’s operations could also be moved to the Operator of Last Resort (OLR), a public sector operator wholly owned by the Department for Transport.
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He insisted the moves would “not impact on the railway’s day-to-day operations” for passengers and staff.
Earlier this month SWR’s accounts, for the year ending 31 March 2019, showed a loss after tax of £136.9m.
The firm operates routes between London Waterloo, Reading, Bristol, Exeter, Weymouth, and Portsmouth, as well as Island Line on the Isle of Wight.
SWR’s owners FirstGroup and MTR were awarded the franchise in August 2017, after outbidding previous operator Stagecoach.
In a statement FirstGroup and MTR said: “We continue to be in ongoing and constructive discussions with the Department for Transport regarding potential commercial and contractual remedies for the franchise and what happens next as we seek to ensure the right outcome for our customers, our shareholders and the government.”