Sea Containers scraps bid for SW Trains

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The future of Great North Eastern Railways (GNER) was cast into further doubt yesterday after the company was forced to abandon its bid for the South Western Trains franchise currently operated by Stagecoach.

In a statement, GNER's parent company, Sea Containers, indicated that one of the main reasons for its withdrawal was its financial problems.

Sea Containers also pointed out that its subsidiary, which operates between London and Edinburgh, needed to concentrate on a judicial review due on 10 July. GNER has won the hearing over a decision by the Office of the Rail Regulator (ORR) to allow a competitor access to its route.

The statement makes clear the link between the finances of Sea Containers and those of GNER - a relationship which the train company has sought to minimise. It also casts doubt on the continuing ability of GNER to operate its franchise.

The controversial decision by the ORR to allow rival company Grand Central to run trains between Sunderland and London instead of GNER's plan to operate more services between Leeds and the capital has undermined the train operator's financial position. GNER had promised to pay the Exchequer £1.3bn over 10 years in return for retaining its franchise. Chris Garnett, GNER's chief executive, said the decision to pull out of the South Western bid was "bitterly, bitterly disappointing". He added: "I have a very heavy workload here. It is just bitterly disappointing as we had put together a very exciting bid."

The decision follows his company's failure to win the South Eastern franchise. Sea Containers has admitted it is still not in a position to release its 2005 financial result and that its net cash position has deteriorated. It is in default of many of its secured credit facilities and may not be able to pay $115m (£62m) of top ranking debt in October.

The Hong Kong metro company MTR, which had bid jointly for South Western with GNER, is to continue as a solo contender. Others seeking the licence are National Express, First Group and Arriva. GNER is challenging the regulator's decision on the ground that Grand Central will be paying lower charges for access to the railway and that this amounts to unfair competition.