Decision on east coast mainline rail bid faces delay

The re-franchising of the east coast mainline, one of the country's premier rail routes, is in danger of being delayed because of the Government's overhaul of the network.

The Strategic Rail Authority is due to re-let the franchise for a seven to 10-year period by next April but there is a growing expectation within the industry that the timetable will slip.

GNER, which is part of the Sea Containers group, is the operator of the prestige route from London to Edinburgh. It is facing competition from three rival bidders: Danish state railways, Virgin Trains and First Group.

Chris Garnett, the chief executive of GNER, said: "The April deadline could be met but it will be very tight. It is terribly unsettling for staff."

The SRA is still to issue a formal invitation to tender to GNER and the three other bidders and the letting of the franchise is further complicated by a £150m shortfall in the Department of Transport's rail budget for next year.

The east coast route is used by 15.5 million passengers a year, generating revenues of £400m. GNER pays the SRA a premium of £30m to operate the franchise and makes an operating profit of £30m-£40m a year.

The DoT's rail White Paper, published in the summer, said that past performance would in future be taken into account when re-letting rail franchises, raising GNER's hopes that it will retain the route. In previous re-franchising contests, the incumbent operator has always lost out.

There are also competition issues in the case of Virgin, which already operates the west coast mainline, and First, which runs Scotrail and TransPennine, while the Danish state railway is an unknown quantity, having never operated any trains in the UK.

Mr Garnett said: "I really don't see us losing the east coast. We have got to come up with the right bid but we know what is required. We will have to get it seriously wrong for the franchise to be taken away from GNER."

As an insurance policy, however, GNER is also bidding for the new Integrated Kent franchise, which will be the next to be put out to tender, and the Great Western franchise from Paddington, which is operated by First.