GNER outbids East Coast rail rivals with £1bn Treasury offer

GNER is set to win the bid battle for the lucrative East Coast mainline rail franchise after offering to pay the Treasury nearly £1bn.

GNER is set to win the bid battle for the lucrative East Coast mainline rail franchise after offering to pay the Treasury nearly £1bn.

David Quarmby, the chairman of the Strategic Rail Authority (SRA), recommended that GNER should keep the London-Scotland route in a meeting with the Department for Transport earlier this month, The Independent on Sunday has learnt.

The news is a huge blow to Virgin Trains, FirstGroup and the Danish state railway, DSB, which all attempted to prise the franchise from GNER by lodging aggressive bids.

But according to a well-placed source, GNER trumped its rivals by agreeing to pay nearly £100m a year to operate the 10-year franchise, which carried more than 15m passengers last year. The final decision has to be approved by the Secretary of State for Transport, Alistair Darling, and the Chancellor, Gordon Brown. An official announcement is due in mid-March.

GNER's relatively good record of running the service since 1996 is thought to have counted in its favour. Nevertheless, it will be forced to make some significant changes to its operation when the new franchise starts on 1 May.

The company, owned by Sea Containers, currently pays the Treasury £19m a year to run the franchise. Therefore, it will have to make some deep cost cuts if the route is to remain profitable.

It is understood that the GNER management, headed by its chief executive, Chris Garnett, has already warned the rail unions of possible redundancies.

Mr Garnett has also held discussions with staff on how they can improve operational efficiency, which will lead to changes to GNER's buffet service.