BUS and rail operator Arriva predicted a renaissance in bus travel last night as it announced a 7.3 per cent rise in operating profits in the past six months.

The group, which is based in Sunderland, said it believed the Government's transport White Paper could underpin a resurgence of services in the regions.

It said its Arriva Northern franchise, which it is due to hand over to a consortium of Serco and Dutch railways, was currently achieving the highest levels of operating performance since privatisation in 1997.

However, the handover has been delayed and the Strategic Rail Authority has approached Arriva about a short extension of its tenure to ensure services continue to operate.

Chief executive Bob Davies said the group would press ahead with expansion in Europe and London, which it has earmarked as a target for acquisitions and growth.

The group said it was seeing continued growth in the capital, where services are heavily regulated, and encouraging early indications of passenger growth from new projects outside London.

Arriva, which expects to invest about £40m in buses and other improvements this year, said partnerships with local authorities in Durham and Kent were showing signs of boosting passenger growth.

But it rejected the case for more regulation of services outside the capital, saying it believed strong partnerships between operators and local authorities could produce improvements instead.

"We believe that if local authorities and bus operators work closely together, they can deliver real benefits," a spokesman said.

Arriva said its UK bus operations achieved half-year operating profits of £28.1m against £26.1m last time.

The group said it had seen an encouraging start to its operation of the Arriva Trains Wales franchise.

Operating profits in the rail division fell to £14.5m from £14.9m previously, which it attributed to the loss of its Merseyrail franchise last year and the handover of trans-Pennine services to rival operator First Group.

The company said its international division improved operating profits by 41 per cent from £9.6m to £13.2m on the back of strong organic growth and excellent operational performance.

It said it was seeing exciting developments in its international division, which has operations in Germany, Denmark, Italy, the Netherlands and Portugal.

The company made its first entry into Germany in April with the acquisition of Prignitzer Eisenbahn Gruppe, which runs rail services in Berlin and the Ruhr region.

Group bottom line profits were broadly flat at £45.2m compared with £45.8m last time