East Coast line up for grabs as GNER is axed

Britain's leading rail companies were preparing bids to run the flagship East Coast Main Line yesterday after Great North Eastern Railways (GNER) was stripped of the franchise.

Among those expected to submit proposals are Virgin, First Group, Stagecoach and National Express, all of which will be offering the Government hundreds of millions less than the huge £1.3bn bid that GNER failed to honour, leading to its downfall.

After months of talks, ministers finally decided to pull the plug after officials found that GNER was missing financial targets by "a country mile". The Sea Containers subsidiary will continue to run the London-Edinburgh services for between 12 and 18 months under a temporary agreement.

Operators bidding for the route - "expressions of interest" have to be in by 15 January - will be aware that the Department for Transport has abandoned its de facto policy of awarding franchises to the highest bidder. The criteria for awarding franchises now include "deliverability".

The Exchequer has written off any chance of a premium payment next year and has told GNER it must simply run the trains. If the incumbent exceeds specific targets, however, it will receive incentive payments.

A "performance bond" is still in place so that if GNER fails to operate efficiently and the agreement is terminated early, it will have to meet any additional costs.

The Department for Transport said current services would continue as normal and that all tickets will still be valid.

The financial problems of GNER have been made considerably worse by the bankruptcy of its parent company Sea Containers.