TRANSPORT operator Stagecoach plans to shake up its troubled US coach division after first-half profits across the group fell by 18 per cent.

Stagecoach, which has also been hit by disruption on the UK rail network, and by a bus strike over pay in the North-East, is axing 550 jobs and mothballing 330 coaches in the US to cut costs.

The Coach USA operation has seen revenues tumble since the September 11 terror attacks in New York and Washington, with commuter, airport and sight-seeing services affected.

In September and October, operating profits at Coach USA came in £13m below expectations, the group said.

The group, of Perth, hopes to save at least £17m at the division, which had been on the mend before the attacks.

Pre-tax profits for the group were £75.1m before one-off costs, down from £91.8m last year. Turnover across continuing operations rose three per cent to £957.9m.

Chairman Brian Souter said the September 11 attacks had affected the "short term performance" of Coach USA, but he said continued uncertainty on the UK rail network following the Hatfield crash and Railtrack administration was also hurting the group.

Stagecoach runs the South West Trains franchise and has a 49 per cent stake in Virgin rail, which operates the CrossCountry and West Coast main line routes.

"We have seen a significant deterioration in operating performance in the post-administration period," he said.

Profits at South West Trains fell 14 per cent to £20.8m with a 1.9 per cent fall in passenger volumes exacerbated by a recent strike.

Passenger volumes at Virgin Rail were "slowly recovering" and Stagecoach's share of operating profits rose from £7.6m to £8.4m.

The UK bus division registered passenger growth of 1.2 per cent, but wage inflation held back profits.

Operations in Darlington, Hartlepool and Stockton had been hit by strike action. That was settled last month, when the firm agreed to increase drivers' wages to £6 an hour.