UPDATE 3-National Express not ruling out rights issue

* CEO says not planning rights issue "at the moment"

* Says still reviewing all options on debt reduction

* Group Q1 revenue up 7.9 pct, helped by forex

* Says discussing rail franchises with UK government (adds Department for Transport quote, paras 8 & 9)

By John Bowker and Paul Hoskins

LONDON, May 6 (Reuters) - British rail and bus operator National Express (NEX.L) sees a rights issue as one possible way of reducing its 1 billion pound ($1.51 billion) debt-pile, although it is not planning to launch one at the present time.

Analysts have been saying for some months now that the group, which has operations in North America and Spain as well as the UK, would need a rights issue to manage debt that reached 1.18 billion pounds at the end of 2008.

National Express Chief Executive Richard Bowker said the group was still trying to repair its balance sheet through "self help" such as cost cuts, but would not rule out asking shareholders for assistance in the future.

"It is not our intention at the moment (to launch a rights issue), but we will keep looking at all options," he told reporters on Wednesday.

Bowker's comments came as National Express said foreign exchange movements had helped lift revenue in the first quarter by nearly 8 percent, but that it planned further cost cuts amid challenging market conditions.

The firm is also struggling with the terms of its East Coast UK rail franchise that links London with Scotland, but Bowker said discussions with the British government about how to solve the problem were confidential.

The company's battered shares soared nearly 30 percent on Tuesday after a weekend press report said it had reached an outline deal with the British government to scrap the troubled franchise, agreed in 2007 on terms that relied on strong passenger growth that has not transpired.

But the Daily Telegraph quoted a Department for Transport spokesman on Thursday as saying National Express risked losing all three of its rail franchises if it handed back the East Coast service.

"If they give up one there is the possibility they could have all three taken off them. That's the gamble they would take," the spokesman was reported as saying.

Revenue growth on the line was just 0.3 percent for the three months to end March.

National Express shares ended 1 percent at 3331 pence on Wednesday, valuing the business at about 500 million pounds.

The company said total group revenue rose 7.9 percent in the first three months of the year with underlying growth of 4.1 percent at its UK Bus and Coach division.

"We have achieved our target to deliver over 15 million pounds of annual cost savings from the UK rationalisation programme announced in December 2008, of which a significant part is in the rail business, with further savings now identified for delivery later in 2009," the company said in a trading update. (Editing by Karen Foster and Anshuman Daga)