First Group has beaten Virgin Trains to win the bid to run rail services on the flagship West Coast line.
Virgin has been running services on the line since 1997 but the government announced today that the new franchise which runs from December 2012 to 2026 has been awarded to First Group.
The Department for Transport's decision will mean the end of the Virgin Trains brand in December. The company lost its other rail franchise - Cross Country - in 2007.
First Group said it would be adding capacity on the route which runs from Euston in London to the West Midlands, Greater Manchester, Liverpool, Glasgow and Edinburgh.
But Virgin president Sir Richard Branson said the decision was “very disappointing” and questioned the amount of money that First Group had offered to secure the route.
First Group was awarded the franchise partly because it outbid Virgin Trains (industry sources suggest First Group bid £6.5 to £7 billion over 14 years compared with Virgin’s offer of £5.5 to £6 billion) and partly because of its promise to improve services.
Tim O'Toole, First Group’s chief executive, said: “We are delighted to be selected by government to operate this unique railway which connects communities across the country and plays a vital role in the UK's economic growth.
“Our winning bid is a deliverable proposition that is compelling for all who want to see a greater use of our rail networks. We will be making significant improvements including reduced journey times and introducing new direct services.”
First Group will take over the route on December 9 when the company said it would benefit from an extra106 new Pendolino coaches coming into service. The company already holds the franchises for several UK rail routes including services from Paddington to the West Country and Wales plus Scot Rail in Scotland and First Capital Connect in the south-east.
Branson said that Virgin Trains could not have bid any more money to retain the franchise and added that it would have been “insanity” to do so.
“We submitted a strong and deliverable bid based on improving customers’ experience, increased investment and sustained innovation,” he said. “To have bid more would have involved dramatic cuts to customer quality and considerable fare rises which we were unwilling to entertain.
“We also did not want to risk letting everybody down with almost certain bankruptcy at some time during the franchise as happened to GNER and National Express who overbid on the East Coast mainline.
“Sadly the government has chosen to take that risk with First Group and we only hope they will continue to drive dramatic improvements on this line for years to come without letting everybody down.”
But rail minister Theresa Villiers said that the new franchise would "deliver big improvements for passengers, with more seats and plans for more services".
“Targets to meet on passenger satisfaction will be introduced for the first time in an InterCity rail franchise and passengers will also benefit from smart ticketing and from investment in stations," added Villiers.
“The West Coast is the first of the new longer franchises to be let by the coalition which has helped us secure real benefits for passengers by encouraging First West Coast Limited to invest in the future of the service.”