GNER retains East Coast franchise in £1.3bn deal

The battle to run the rail network's flagship East Coast Main Line was won today by the present operators GNER in what was described as "the biggest financial transaction in European railway history".

The battle to run the rail network's flagship East Coast Main Line was won today by the present operators GNER in what was described as "the biggest financial transaction in European railway history".

Under the new franchise, GNER will pay £1.3 billion to the Treasury over the life of the franchise, which will be seven years, or extended to 10 years if performance targets are met.

To retain the franchise, which it started running in 1996, GNER beat off the challenge of three other parties, including Sir Richard Branson's rail company Virgin Trains.

The East Coast line runs out of London's Kings Cross station up the east coast of England via Peterborough and Newcastle upon Tyne, on to Edinburgh and as far north as Aberdeen and Inverness.

Transport Secretary Alistair Darling said: "The Government wants to see improvements in the quality of service to passengers as well as a good deal for taxpayers.

"GNER is committed to improving punctuality and reliability of its services along the entire East Coast route. It will refurbish carriages and invest in stations, as well as maintaining the high levels of on-board service. Extra staff will also be recruited to provide added passenger security.

"Improvements like this will encourage more and more people to travel by train."

The new franchise, announced today by the Strategic Rail Authority (SRA), will start on May 1.

GNER's chief executive, Christopher Garnett, said: "Everyone in GNER is delighted to have won a new franchise. We look forward to building a bigger and better railway, running extra services with more reliable and more comfortable trains, and carrying many more passengers.

"Today's welcome announcement is the next step in GNER's continuing development. We've come a long way in almost nine years and will go a lot further in the next 10.

"I am very grateful for the fantastic support we have received from passengers across the route. We will be working doubly hard to repay the faith shown in us.

"I would also like to pay tribute to GNER's employees who have kept going during recent uncertain months and have continued to deliver an excellent standard of service."

The SRA chairman David Quarmby said: "It was vitally important to ensure that this new franchise was signed and delivered for a 1 May start date. Congratulations to all concerned - it ensures continuity in the delivery of this important intercity service, with benefits for passengers and taxpayers alike."

The SRA said the benefits for passengers would be:

* £75 million of new investment in high-speed trains;
* £25 million of new investment in stations;
* 18 new special constables along the line of route;
* £3 million of investment in customer security measures both at stations, car parks and on trains; * £5m of investment in depot facilities;
* New half-hourly London-Leeds services throughout the day;
* A commitment to develop a newly electrified stretch of track south of Leeds, providing greater Leeds to London capacity;
* A contractual commitment to restore operational performance to better than pre-October 2000 Hatfield rail crash levels, culminating in a train punctuality figure of 90% by 2010 and staying there or above;
* Up to £5 million investment over the franchise term in improving access to franchise facilities for the disabled;
* 900 new car parking spaces along the line of route, focusing on known areas of under-capacity;
* 50 new FastTicket machines along the line of route at key stations and 60 additional revenue protection staff.

Having originally received Government subsidies to help run the line, GNER currently pays premiums to the Treasury of around £22 million a year.

It will now be paying an average of £130 million a year for the life of the franchise.

Bob Crow, leader of the biggest rail union, the RMT, has warned that such payments raised the threat of "service cuts and massive fare rises".

GNER's victory today spelled defeat for Virgin which already runs the West Coast Main Line route.

The other two companies that missed out in the bidding process were Danish rail company DSB and UK transport giant FirstGroup.

At one point it looked as if a 20-year franchise would be awarded on the East Coast route.

But a change of policy about the length of franchises led to GNER getting, in April 2003, only a two-year extension to its original seven-year franchise.

It was then announced that from May 1, 2005, the franchise would run for seven or 10 years.

British Rail invested heavily in the East Coast route, in contrast to the cash-starved West Coast route now run by Virgin Trains.

GNER has had to contend with the massive service disruptions caused by three serious rail accidents in which the company was the innocent party.

The crashes were Hatfield in October 2000, Selby in February 2001 and Potters Bar in May 2002.

The line carries more than 15 million passengers a year and generates revenues of around £400 million.

Mr Crow said after the announcement had been made: "This is not good news for the travelling public or for our members.

"This franchise should have been brought back in-house. Instead, we have the prospect now of higher fares, service cuts and a squeeze on our members' terms and conditions.

"We will resist any attacks on our members' jobs or pay and any cuts in services."