TRANSPORT group Arriva is considering expanding its continental European rail operations.

The train and bus operator, based in Sunderland, is considering operating trains in Germany.

Arriva is also looking at possibilities for expansion into rail in Italy and Portugal, where it already runs buses.

The group, which runs rail services in the North-East of England and Wales, already operates trains in Jutland, in Denmark, and Groeningen, in the Netherlands.

It is reported to be considering taking advantage of the increasingly liberalised German rail market, where regional and local authorities are putting subsidised services out to tender.

Chief executive Bob Davies told the Financial Times that German state-owned railway Deutsche Bahn (DB) had lost much of its market share to local, municipally-owned companies.

"That, to me, creates a huge opportunity for a commercial operator," Mr Davies said.

Arriva runs the Arriva Trains Northern franchise in the North-East and began operating the Wales and Borders franchise in December.

The company failed in its attempts to win the Merseyrail and Greater Anglia franchises.

But it is bidding to run the expanded Northern franchise, which covers northern England, and the replacement ScotRail franchise.

The group was already Denmark's biggest bus operator before it won the right to run Danish rail services in January 2002.

It took over passenger rail services in much of central and northern Jutland from state-owned railway DSB, representing 15 per cent of Denmark's passenger rail network, on a seven-year contract.

The company faced criticism from the Danish authorities and newspapers after it initially underestimated the number of drivers it would need and as a result was forced to cancel trains or replace them with bus services.

The problems were overcome when DSB took back temporary control of part of Arriva's network, allowing the company more time to train drivers.