Rail regulator deals heavy blow to GNER

GNER, the operator of inter-city trains on the east coast main line, suffered a severe setback yesterday after the Rail Regulator rejected its plans for a big increase in services.

In a surprise ruling, the Office of the Rail Regulator refused GNER's application to increase the number of services between London and Leeds from 53 to 65 a day and instead approved a new service from Sunderland to London to be operated by Grand Central Railway.

The refusal to allow GNER more services could throw the economics of its new 10-year franchise on the east coast route into doubt. The company, a subsidiary of James Sherwood's Sea Containers, has agreed to make £1.3bn in premium payments to the Treasury over the next decade.

It based its financial calculations on the assumption it would be able to lift passenger numbers and revenues by running a greater number of services.

GNER said it "fundamentally disagreed" with the ORR's conclusions, which demonstrated "a lack of joined-up thinking in the railway industry". A spokesman added: "It is astonishing that the ORR has rejected GNER's additional Leeds-London services, as that is what the Government, in awarding the east coast franchise, contracted GNER to deliver."

Grand Central said it was delighted to get the go-ahead for the new Sunderland-London service, which is expected to begin next year. But Ian Yeowart, the managing director, said he was disappointed its application for a service from Bradford and Halifax to London had not been approved. Its application to launch the new routes has been supported by MPs in West Yorkshire and the North-east. More than 5,000 people signed petitions in the two areas.