Stagecoach faces a backlash from commuter groups and union leaders after announcing plans today to return £700 million to shareholders.

The cash return is almost double the £400 million forecast by the transport operator before Christmas.

About a quarter will go straight into the pockets of Brian Souter, the chief executive, and his sister, Ann Gloag, who co-founded the firm in 1980.

Rail campaign group Passenger Focus in December warned that the £400 million payout would stick in the throats of commuters facing packed trains on Stagecoach’s South West Trains franchise.

Stagecoach today said it was able to up the proposed payout after strong trading which will see results for the year to 30 April come in “at the upper end of expectations”.

A trading statement revealed the group has seen revenues soar across most of its business, which also owns half of Virgin Rail, and runs buses across the UK and the US.

Stagecoach said Virgin Rail had benefited from the recent re-negotiation of the West Coast franchise and a jump in passenger numbers.

There had also been a “sustained reduction” in fuel costs across the group.

“The overall trading of the group remains strong and earnings per share for the year ending 30 April 2007 are now anticipated to be at the upper end of our expectations,” Stagecoach said.

Shares rose 2 per cent, or 3.25p to 164p, and analysts said the trading update could boost the whole bus and rail sector.

The proposed return, equivalent to 40 per cent of Stagecoach’s market capitalisation, will be made before 30 June.

Investors will most likely receive 63p per share.

A Stagecoach spokesman defended the payout ans said the company was generally far more competitive on fares than its rivals.

He added: "At the end of the day, we are in business and we have to make a profit and appropriate returns to shareholders as well, but we try and get the balance right."

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