Serco Group, the service company that operates the Docklands Light Railway and Woolwich Ferry, has won a £140 million contract to run the London bike hire scheme championed by Mayor Boris Johnson.

Transport for London (TfL) said it had awarded Serco a six-year contract, with a possible two-year extension, to design, build and operate the London Cycle Hire scheme (LCHS), which it expects to generate an extra 40,000 bicycle journeys a day in Central London.

The contract, to start immediately, includes an initial installation period that is expected to be completed within a year. The contract is valued at about £140 million over the six-year term, split between installation and operation of the scheme.

Revenues from the scheme, which will be akin to the Vélib in Paris, will be paid to TfL.

TfL said that planning permission had been secured for more than a quarter of the 400 docking stations in the nine boroughs and royal parks covered by the scheme.

It will initially cover an area of about 44sq km, roughly equivalent to TfL's central fare zone.

Mr Johnson, himself a keen cyclist, said: "I'm sure that the cycling revolution taking place in the capital will rapidly become the envy of the world."

Under the LCHS contract, Serco will provide and operate 6,000 bicycles for hire from 400 docking stations with 10,000 docking points.

The bicycles will be supplied by BIXI, based on the design used in Montreal, Canada.

Serco had been seen as a favourite to win the contract as it already runs the Docklands Light Railway and Woolwich Ferry and maintains traffic lights for TfL.

Christopher Hyman, chief executive of Serco, said: "We are delighted to be helping Transport for London address London's congestion and environmental issues with this innovative cycle hire scheme."

He said he believed the company's design for London was "capable of being rolled out in other cities which are facing many of the same transport challenges".

David Brown, managing director of surface transport at TfL, said: "The London Cycle Hire scheme will be the most sustainable, environmentally friendly form of public transport ever seen in the capital.

"Cycling is a quick, convenient and healthy way of making short journeys in London, and we're confident that, from next summer, our new cycle hire scheme will become an essential part of the transport network in central London."

TfL predicts that each bike will be used by about ten different people each day, but only a tiny proportion will be people switching from cars to pedal power. The majority of users will be bus and train passengers.

To avoid queues forming, TfL has decided not to build any docking stations close to rail terminuses. It argues that the bikes would be too popular among rail commuters and that racks would almost always be empty, damaging the image of the scheme.

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