A consortium involving Sir Richard Branson’s train company Virgin Trains has been chosen to run the East Coast main line franchise from next year.
The Department for Transport (DfT) said the consortium involving Virgin and transport company Stagecoach, who already run the West Coast line, will start the East Coast franchise in March 2015 .
The award of the new franchise marks a return to the private sector for East Coast which has been run by the DfT since 2009 following the withdrawal of National Express.
Labour and transport unions had fought to keep East Coast in the public sector, pointing to the good returns it has made to the Treasury.
There has been speculation that a consortium of Eurotunnel and French company Keolis which is 70% owned by French state railway SNCF, had been chosen as the new East Coast operator.
But Eurotunnel/Keolis have now missed out, as have the other shortlisted bidder, FirstGroup (correct) which has recently also lost its First Capital Connect and ScotRail franchises.
The new operator of the London to Scotland East Coast route will be called Inter City Railways.
Under the terms of the eight-year franchise there will be:
• 23 new services from London to key destinations, with 75 more station calls a day
• Plans for direct links to Huddersfield, Sunderland, Middlesbrough, Dewsbury and Thornaby
• Proposals for more trains to London from Bradford, Edinburgh, Harrogate, Leeds, Lincoln, Newcastle, Shipley, Stirling and York
• 3,100 extra seats for the morning peak time by 2020
• Across the entire train fleet there will be 12,200 additional seats - a 50% increase
• 65 state-of-the-art Intercity Express trains brought into passenger service from 2018, totalling 500 new carriages
• Journey times from London to Leeds reduced by 14 minutes, and from London to Edinburgh by 13 minutes
• A £140 million investment package to improve trains and stations
Over the next eight years Inter City Railways will pay the Government around £3.3 billion to operate the franchise.
Transport Secretary Patrick McLoughlin said: This is a fantastic deal for passengers and for staff on this vital route. It gives passengers more seats, more services and new trains.
“We are putting passengers at the heart of the service. I believe Stagecoach and Virgin will not only deliver for customers but also for the British taxpayer.
“This Government knows the importance of our railways. That is why they are a vital part of our long-term economic plan, with over £38 billion being spent on the network over the next five years.”
Stagecoach group chief executive Martin Griffiths said: “A passion for customers, employees and the community is at the heart of our plans for the franchise. We want to build on the quality and pride of the people who will be joining our team.”
Virgin Group senior partner Patrick McCall said: “We’re delighted to have been chosen. Our long-term partnership with Stagecoach has seen a revolution in customer service standards, great product innovation, reduced journey times and improved timetables on the West Coast mainline.
“We plan to deliver similar success on the East Coast.”
National Express’s pull-out from the East Coast franchise had been preceded by the withdrawal of another private sector operator of the line, GNER.
Mick Cash, general secretary of the RMT union, said the reprivatisation of the line was “a national disgrace and an act of utter betrayal”.
He added: “It is simply ludicrous to even contemplate reprivatisation when not only have there been two previous private sector failures on the East Coast route but when the public sector rescue operation has been such a stunning success.”
Under the control of the DfT, the East Coast line had been operated by Directly Operated Railways (DOR).
On BBC Radio 4’s Today programme Mr McLoughlin said: “We always made clear that DOR was a backstop gap and it’s still there if I need it for other rail operations.
“It will always still be there, but the simple fact is that it is time to move this line now forward.”
Mr McLoughlin said DOR had returned more than £1 billion to the Treasury over the last five years but Virgin/Stagecoach would return £3.3 billion over the next eight years.
Shadow transport secretary Michael Dugher said he had written to the DfT’s permanent secretary asking him to postpone the East Coast franchise process.
Mr Dugher said: “The taxpayer and the travelling public have been sold down the river. This whole franchise process shouldn’t have happened.
“East Coast has ... established itself as one of the best train operating companies in the country. Rather than rigging the franchise timetable in order to sell it off before the election, David Cameron’s Government should have been putting the public interest first and working to get a better deal for passengers.”
He added: “It’s absurd that our own public operator is the only rail company in the world that has been barred from challenging to run its own services, on the ideological grounds that it is British and publicly owned.”
FirstGroup chief executive Tim O’Toole said: “Our bid for the East Coast franchise was ambitious yet realistic. Had it been selected, it would have created a world-class railway for passengers and value for taxpayers with a balanced level of risk and returns for shareholders.
“As one of the UK’s most experienced operators, we remain committed to the rail market but we are dissatisfied not to have secured any of the franchises that have come up for tender in this first round.”