The Midland Metro tram system lost almost �4m in operating costs during its first 18 months of operation.

Altram, the company which runs the trams between Birmingham and Wolverhampton, blamed a lack of passengers and higher-than-expected running costs.

Original forecasts suggested that up to 15 million people would use the trams, but currently only six million travel on them each year.

The metro system, which cost �145m, has been plagued with problems since it opened in the summer of 1999.

'Challenging problems'

Among the difficulties experienced include vandalism, trams breaking down and faulty ticket machines.

Phil Bateman, corporate affairs director for Travel Midland Metro, said: "Clearly the figures are not good but they run up to December 2000.

"We are in a better position now in terms of reliability and we are seeing passengers approval of the system continuing to grow."

Mr Bateman said the problems faced by the metro system had been "challenging" adding: "We have had more than our fair share of vandalism and we have had set-backs, but it was a new system and there are always difficulties on any new company.

"The important thing is that we are still in operation and the people of the West Midlands like the system.

"They have seen its reliability grow."

Midlands Metro is the first street tramway to run in the West Midlands for over 40 years.