LONDON, May 16 (Reuters) - Britain will take back control of the running of the rail route between London and Edinburgh from private operator Stagecoach after the company failed to make the contract work financially.

“We have now been advised by the Department for Transport that the Secretary of State for Transport plans to announce today that he intends to appoint the “Operator of Last Resort” to operate the InterCity East Coast trains services,” Stagecoach said in a statement on Wednesday. (Reporting by Sarah Young, Editing by Kate Holton)</s>Media playback is unsupported on your device Media caption Chris Grayling says talk of nationalising the whole rail network was "missing the point"

Rail services on the East Coast Main Line are being brought back under government control, following the failure of the current franchise.

Operators Stagecoach and Virgin Trains will hand over control from 24 June.

The Department for Transport will run the service until a new public-private partnership can be appointed in 2020.

Transport Secretary Chris Grayling said it would smooth the transition to a new operator, but critics said it was evidence of private sector failure.

Mr Grayling said the franchise had failed because Stagecoach and Virgin Trains had "got their bid wrong", overestimating the profitability of the line.

It is the third time in a just over a decade that the government has called a halt to the East Coast franchise.

The London to Edinburgh line has been run by a joint venture between Stagecoach and Virgin, since 2015.

The companies promised to pay £3.3bn to run the franchise until 2023, but at the end of last year it become clear they were running into trouble.

In February it was announced that the franchise would end early, leading to accusations the government was bailing them out.

A history of failure

This is the third time a franchise on the East Coast Main Line has failed.

In 2005, GNER signed a £1.35bn, 10-year deal in what was then the biggest contract in European railway history. One year later it was stripped of the route.

In August 2007, National Express agreed a £1.4bn deal, but then handed it back to the government in 2009 amid the financial crisis.

It was then government-run until Stagecoach and Virgin's £3.3bn bid in 2015.

Read more: What went wrong at the East Coast Main Line?

Analysis: By Theo Leggett, business correspondent

To have one rail company fail to fulfil its contract may be regarded as a misfortune. To lose three looks like carelessness.

The government insists that the East Coast service is not failing, and will continue to generate revenue for the public purse.

It says Stagecoach and Virgin have only themselves to blame for their inability to make enough money from the line.

That may be true. But critics say that if operators keep over-bidding, then that suggests a problem with the tender process.

The assumptions made by the DfT when inviting bids have also been widely questioned.

Now the DfT wants to use the line as a model for a new type of franchise, based on a public-private partnership.

That may help to solve some issues - for example, reducing the friction between the track operator, Network Rail and the train operator.

But whether it will help to make the line viable for the new operator is open to question.

Mr Grayling said the companies had overestimated growth in passenger numbers and revenues and were having to reach into their own pockets to fulfil the terms of the franchise.

He told the Commons that Stagecoach and Virgin have lost almost £200m, but there had not been a loss to taxpayers "at this time".

The rail companies have blamed their problems on Network Rail, saying it had failed to upgrade the line which would have allowed them to run more frequent services.

Shadow Chancellor, John McDonnell tweeted that he welcomed the move, which he said was implementing Labour's Manifesto promise to renationalise the railways.

Green Party MP Caroline Lucas tweeted that public ownership should be extended to the rest of the rail network.

For the next two years the operator of last resort, overseen by the Department of Transport will operate the East Coast Main Line.

It will be advised by the engineering firm Arup.

New franchise

In 2020 there will be another tender process for operating the franchise.

Mr Grayling would like to see closer co-operation between the state-owned Network Rail which owns the track infrastructure and the private train operators.

Despite their failure on the East Coast Main Line, Virgin and Stagecoach will be allowed to bid for future rail franchises.

Analysis: By Norman Smith, assistant political editor

For a government wedded to the benefits of the private sector and to leaving the railways in the hands of private companies, today's decision is a significant blow.

It's also further ammunition for a Corbyn Labour Party committed to renationalising the railways.

Mr Grayling may protest that this is only a temporary measure - but it is still the third time in just over a decade that a private company has had to be stripped of the East Coast Main Line contract.

There are also likely to be raised eyebrows that despite their failure, Virgin Stagecoach will still be able to bid to run the line again after it is transferred back into public private ownership in 2020.

And while memories of British Rail's stale sandwiches may have faded - strikes, costly commuter fares, cramped carriages and failing companies are hardly likely to endear passengers to the current crop of private rail operators.

After looking into problems with the service, Mr Grayling said he was advised "that there is no suggestion of either malpractice or malicious intent in what has happened".

He added that the firms have paid a "high financial and reputational price" in relation to the East Coast route.

Stagecoach said it had attempted to negotiate a new contract with the Department for Transport, without success.

Mr Grayling said passengers and staff would not be affected by the change to the franchise arrangement. He said season tickets, timetables and employment conditions would remain unchanged.</s>Rail services on the East Coast Main Line will be brought back under public control following the termination of the franchise agreement with Virgin Trains East Coast (VTEC).

Transport Secretary Chris Grayling said services on the line between London and Edinburgh will be overseen by the Department for Transport (DfT) from June 24, until a previously-announced public-private partnership running both trains and track operations is introduced in 2020.

He told the Commons that the parent companies of VTEC - Stagecoach and Virgin - had "got their bid wrong" in terms of the revenue from the franchise, which was originally due to run until 2023.

Critics claim the decision to end the £3.3 billion contract early is a "bailout".

Yet Mr Grayling insisted that "taxpayers have not lost out" and it is only the private firms that have "made losses at this time".

He had considered permitting Stagecoach to continue running trains on a not-for-profit basis until 2020 and permit them to earn a performance-related payment at the end of a new deal.

But he opted for an Operator of Last Resort (OLR) controlled by the DfT, to "begin the transition" to the public-private body named East Coast Partnership.

The OLR function is provided by a group of private companies consisting of Arup, SNC-Lavalin Transport Advisory (InterFleet) and EY.

They will operate under the name of "one of Britain's iconic rail brands", the London North Eastern Railway (LNER), Mr Grayling said.

Stagecoach chief executive Martin Griffiths said the firm was "surprised and disappointed" by the decision as it believed its plans offered a "positive, value-for-money way forward for passengers, taxpayers and local communities".

He pledged to "work constructively with the DfT and the OLR" to ensure a "professional transfer" to the new arrangements.

Mr Grayling said there would be no impact on passengers or train staff as the switch would be "no different from a normal franchise change".

He added that he has received "official advice" that restrictions should not be placed on Virgin and Stagecoach's "passport" which entitles them to bid for future rail franchises, as "there is no suggestion of either malpractice or malicious intent".

VTEC is the third private operator to fail to complete the full length of a contract to run services on the East Coast route.

GNER was stripped of the route in 2007 after its parent company suffered financial difficulties, while National Express withdrew in 2009.

Services were run by the DfT for six years up to VTEC taking over in 2015.

Shadow transport secretary Andy McDonald said Mr Grayling had "gifted" Stagecoach and Virgin a "£2 billion bailout" after they failed on the main line, adding: "And he has the audacity to come to that despatch box and say it's not reasonable to remove or place conditions on their passport. Absolutely ludicrous."

The service's most successful period had come under public ownership, Mr McDonald said, until it was "cynically reprivatised".

Mick Whelan, general secretary of Aslef, the train drivers' union, said: "Tory dogma - wedded to the failed model of privatisation - means they will return this line to the private sector, doubtless to fail again, in the not too distant future."</s>The Government today confirmed it was taking the routes back into public control, just three years into an eight-year deal which would have been worth £3.3billion had it been seen through to a conclusion.



Transport Secretary Chris Grayling confirmed the decision in an announcement in the House of Commons today - immediately drawing condemnation from Labour and trade union leaders who dubbed it a "bailout”.



Virgin Trains East Coast, spearheaded by managing director David Horne, won the contract to run the East Coast line after it was privatised in 2015. 



Instead of being run by the Virgin Rail Group, the company is operated by Inter City Railways, which is 90 percent owned by Stagecoach, with Virgin Group retaining a 10 percent stake.

Earlier this year Virgin Group owner, Richard Branson admitted the £3.3billion bid was “based on a number of key assumptions” which had not come to fruitiion. Shadow Transport secretary Andy MacDonald, speaking in the House of Commons, said: “In the last year the Transport Secretary gifted Virgin Stagecoach a £2billion bailout after they failed on the East Coast Line at the same time as awarding these two companies a lucrative contract extension on the west coast and he has the audacity to come to that dispatch box and say it’s not reasonable to remove or place conditions on their passport.



“Three times in under a decade private companies have failed on the east coast and its only successful period was from 2009 to 2015 under public ownership.”



Transport Secretary Chris Grayling told the Commons: "I will terminate Virgin Trains East Coast's contract on June 24, 2018.

"I plan to use a period of Operator of Last Resort control to shape the new partnership. 

"So on the same day, we will start with the launch of a new long-term brand for the East Coast Main Line through the recreation of one of Britain's iconic rail brands, the London and North Eastern Railway, the LNER.



"The team that's been working for me since last autumn to form the Operator of Last Resort will take immediate control of passenger services.



"They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network."

Speaking about the failed East Coast Lines, Mr Branson issues a statement on his blog saying a number of issues had “torpedoed the assumptions of our original bid.”



The Virgin Group boss said: “The considerable delays to this upgrade, to new trains, as well as poor track reliability will cost us significant lost revenue (amounting to hundreds of millions of pounds) and torpedoed the assumptions of our original bid.



“As the facts became clear about these issues (as well as a drop in Britain’s GDP growth) a discussion with the government had to take place and a pragmatic solution was needed to keep delivering improvements and investment in the line.”



Virgin Group declined to comment on the matter.

However, Stagecoach chief executive Martin Griffiths said in a statement issued after the Government's announcement: “We are surprised and disappointed that the Department for Transport has chosen not to proceed with our proposals. 



“We believe our plans offered a positive, value-for-money way forward for passengers, taxpayers and local communities, ensuring the continuation of the exciting transformation already underway on East Coast and a smooth transition to the Government's new East Coast Partnership.”



A spokesman for the company later said the company had met all of its financial obligations up to date, with about £800million paid to the Government. 



He added that the £3.3billion final figure factored in inflation.



A Labour Party spokesman later clarified to Express.co.uk that Mr MacDonald had arrived at the figure of £2billion by working out what Virgin Trains East Coast would have paid the Government for the remaining five years of its contract.</s>Transport Secretary Chris Grayling is under pressure to take the East Coast Main Line back into public control, with an announcement on the future of the rail franchise expected within days.

He was urged by Labour MPs and unions to strip the franchise from its current holder, Virgin Trains East Coast.

Ian Lavery, Labour Party Chair and MP for Wansbeck, pointed out that the line was successful when it was publicly managed from 2009 to 2015.

He said: “The Government should examine and scrutinise the past franchise failures on the East Coast Main Line.

“It’s unchallengeable that the line produced the best financial results when operated by the Government at the same time passenger satisfaction was at a near all time high.

“The general public are in favour of a people’s railway operated by the public. This situation offers a tremendous opportunity of how a people’s railway could be run.”

Mr Grayling has said he will either put the inter-city franchise into public control through an operator of last resort - a consortium led by Arup - or negotiate a short-term deal with the Virgin East Coast, which is owned 90% by transport giant Stagecoach.

Stagecoach reported losses on the line, and in November last year Mr Grayling announced that the franchise would be terminated in 2020 to enable it to become a public-private railway.

But two months later Mr Grayling told the Commons that the franchise would only be able to continue in its current form for a “very small number of months”.

He said Stagecoach had “got its numbers wrong” and had “overbid”.

Labour peer Lord Adonis, a former transport secretary, said it would be a “real scandal” if Virgin and Stagecoach continued running services.

Lord Adonis, who resigned as chairman of the National Infrastructure Commission following the announcement, claimed a new agreement with the companies would be a “huge bailout by another name”.

He said: “Don’t fall for (the) words ‘not for profit’. Virgin and Stagecoach will do very nicely out of this ‘not for profit’ contract.

“It is a real scandal if they get it, since they have just been given a £2bn bailout from their previous contract.”

Stagecoach chief executive Martin Griffiths told the Commons Public Accounts Committee the collapse of the franchise was a “very painful experience”.

He said Stagecoach will lose more than £200m over the course of the franchise, including forfeiting a £165m guarantee.

Mick Whelan, general secretary of train drivers’ union Aslef, said: “This is the third time in 10 years that a private company has mucked up the East Coast Main Line.

“In contrast, when it was run in the public sector, it returned £1bn to the Treasury.

“That shows what we have been saying all along - that Britain’s railways should be run, successfully, as a public service, not for private profit. Because they can’t do it.

“Virgin and Stagecoach have managed reverse alchemy - by turning gold into base metal, and profits into losses on the East Coast.”

The Department for Transport would not confirm when the decision on the future of the franchise will be announced.

Virgin Trains East Coast is the third private operator to fail to complete the full length of a contract to run services on the route.

GNER was stripped of the route in 2007 after its parent company suffered financial difficulties, while National Express withdrew in 2009.</s>LONDON (dpa-AFX) - The Rail services on the East Coast Main Line are being brought back under the U.K. government control.



The U.K. Transport Secretary Chris Grayling told Parliament that temporary state ownership would provide the smoothest transition to a new operator.



The loss-making service is being renamed London and North Eastern Railway or LNER. 



Mr Grayling told Parliament that after two months of analysis he concluded that taking the service back into state control would be the best option.



Grayling said, 'I am therefore informing the House that I will terminate Virgin Trains East Coast's contract on 24 June 2018.' 



'I plan to use a period of operator of last resort control to shape the new partnership,' said Mr Grayling.



He said the aim was to create a new public-private partnership from 2020, with 'one single team operating the railway'.



'They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network.'



Stagecoach Group plc.' (SGC.L) subsidiary company, East Coast Mainline Company Limited ('ECML', trading as Virgin Trains East Coast) is the current operator of the InterCity East Coast rail franchise under an agreement with the Department for Transport.



Stagecoach said that ECML has been negotiating a new direct award franchise with the DfT but we understand that the Secretary of State for Transport is no longer considering entering into a new franchise with ECML. The financial consequences of that are expected to be consistent with the Company's announcement of 5 February 2018.



Stagecoach Group Chief Executive, Martin Griffiths, said, 'We are surprised and disappointed that the Department for Transport has chosen not to proceed with our proposals. We believe our plans offered a positive, value-for-money way forward for passengers, taxpayers and local communities, ensuring the continuation of the exciting transformation already underway on East Coast and a smooth transition to the Government's new East Coast Partnership.'



Griffiths said,'However, we respect the Government's decision. We will work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements, supporting our employees and maintaining the same clear focus on our customers as we have over the past three years.'



Copyright RTT News/dpa-AFX</s>Rail services on the East Coast Main Line are to be brought back under public control following the termination of an agreement with them and Virgin Trains East Coast.

Stagecoach Group, which owns 90 per cent of VTEC, said it was "surprised and disappointed" that the Government chose not to award it a new deal to continue running services on the London to Edingurgh route.

Trains will be run by the Department for Transport (DfT) through an Operator of Last Resort (OLR).

Stagecoach have promised to "work constructively with the DfT and the OLR in weeks ahead to ensure a professional transfer to the new arrangements."

Vigrin Trains East Coast was awarded the franchise to run trains for eight years in 2014 but the private operators have since complained of losing money on the line between London and Edinburgh.

Transport Secretary Chris Grayling told the House of Commons back in February that the franchise would only be able to continue in its current form for a “very small number of months” as Stagecoach had “got its numbers wrong” and “overbid”. 



Shadow transport secretary Andy McDonald has tweeted: “Three private companies failed on the East Coast route in 10 years. Its only successful period was under public ownership before it was cynically re-privatised by the Tories, resulting in a £2billion taxpayer bailout.

"They are defending a broken system at the passengers expense"

The Hull Daily Mail has recently launched a free app which features all the latest news, sport and what’s on information. You can download it for iPhone and iPad from Apple's App Store , or get the Android version from Google Play .</s>A new business called London North Eastern Railway (LNER) is taking over East Coast Main Line services from June 24 2018.

It will be owned by the Government at first, and the plan is to bring in a private sector partner later.

But what will it mean for passengers?

The Department for Transport says journeys on the East Coast Main Line won’t be affected.

Tickets, timetables and train services will all stay the same even though a different operator will be in charge.

There will be a short transition period. So passengers can carry on using Virgin Trains East Coast’s customer and ticket booking services in the usual way until the transition is complete.

Is my ticket still valid?

Yes it is. All tickets bought are still valid for the dates shown on the ticket. This includes all season tickets and all pre-purchased tickets.

Will my ticket for future travel still be valid on LNER services?

Yes it is. All tickets bought for future travel will still be valid for the dates shown on the ticket.

What happens if I want to buy a ticket in advance for a journey with LNER?

You can still buy and book tickets for future travel in the same way you do now, via the Virgin Trains East Coast website. Tickets you’ve bought for travel before the change in operator will be accepted on LNER services.

Will there be any changes to ticket prices?

There will be no immediate changes to ticket prices. Any future changes in price will be in line with normal market practice.

I have travel vouchers from a previous refund. Will these be honoured by LNER?

Yes, you can still use your travel vouchers, they will remain valid up to their expiry date.

My journey is partly on Virgin Trains East Coast and partly on another train operator, is my ticket valid?

Yes, nothing will change. All valid tickets will continue to be accepted as they would have been on Virgin Trains East Coast services.

Will timetables change as a result of the takeover?

No, trains will continue to run as normal and no disruption is expected as a result of the change in operator. The timetable and train times scheduled will remain the same under LNER.

Any planned engineering works will still go ahead so services will be impacted on those dates as planned. You should check the Virgin Trains East Coast timetable information before you travel for journey updates.

Will I still be able to claim compensation if my train is delayed?

Yes, you are still entitled to claim compensation for journeys that are delayed by 30 minutes or more on the route. Find out more about delay repay.

Information about claiming compensation for delayed LNER trains will be available on the LNER website once LNER have started operating the service.

Will food and drink still be available on the train?

Yes, the catering on trains will carry on as normal.

Can I still bring my bike?

Yes, the arrangements for carrying bikes, luggage, dogs etc. will stay the same.

Just like your tickets, your reservation will stay the same and remain valid.

I have booked assisted travel. Do I need to re-book?

No, you do not need to rebook. All your travel arrangements will be carried forward and the change of operator will not affect your journey.

London North Eastern Railway tickets, timetables, trains and travel plans will all stay exactly the same.

About the transfer to LNER

Are there any immediate changes from today?

No, nothing will change immediately. Until the transfer to LNER, Virgin Trains East Coast will continue to operate the services you use as normal.

What will change on transfer to LNER?

There will be no change to the running of the trains. Services will continue to operate as usual and there will be no impact on customers.

Following the change of operator, trains on the East Coast Mainline will operate as LNER, rather than Virgin Trains East Coast.

What is happening to the staff who work for Virgin Trains East Coast?

People who are directly employed by Virgin Trains East Coast will transfer over to LNER. No disruption is expected to services as a result of this transfer and you will continue to receive a high quality service from experienced staff.

Will the train company name change?

Yes, Virgin Trains East Coast trains will become LNER.

Will the trains look any different?

The trains will gradually transform to display LNER branding. There is not expected to be any disruption to services as a result of this change of brand.

What is the Intercity East Coast Franchise?

The Intercity East Coast Franchise operates on the East Coast Mainline route between London Kings Cross to Hull, Leeds, Harrogate, York, Newcastle, Edinburgh, Glasgow, Inverness and Aberdeen.

The Intercity East Coast Franchise has been operated by Virgin Trains East Coast since 2015. Virgin Trains East Coast is owned 90% by Stagecoach plc and 10% by Virgin Trains Group.

What is happening to the Intercity East Coast Franchise?

The Department for Transport has set up a new publically owned operating company, LNER Ltd, to run the trains that are currently operated by Virgin Trains East Coast.</s>Rachel is a Verdict reporter covering global business, finance, and politics. You can reach her at rachel.dobbs@verdict.co.uk

Rail services on Britain’s East Coast Main Line are returning to state ownership.

Chris Grayling, the transport secretary, told parliament today that the rail line will be nationalised and relaunched as the London and North Eastern Railway.

Grayling said the measure is temporary, and will ensure “the smoothest possible transition to the creation of the new East Coast Partnership” and will be in “the long-term interests of passengers”.

The line, which between London and Edinburgh, has been run as a joint venture between Stagecoach and Virgin, under the name Virgin Trains East Coast, since 2015.

The venture ran into financial trouble last year, and Grayling told parliament that the franchise had lost almost £200 million. Despite this, he argued that the East Coast Line is not a failing rail service.

To prevent further losses, the government will terminate Virgin Trains East Coast’s contract on 24 June 2018. It will then be under the control of the Department of Transport.

Grayling said this period of state control will be used to establish a new public-private partnership from 2020.

Grayling was also careful to state that the move would not result in any change for passengers or railway staff.

The UK’s opposition Labour Party has delighted in the announcement. Labour has long been critical of privatised rail services. John McDonnell, the shadow chancellor, tweeted to congratulate Grayling for the move, saying that it was a step towards meeting Labour’s manifesto promise to renationalise the UK’s railways.

Following Grayling’s statement in the Commons, Labour’s Jenny Chapman challenged him to stand up and say: “My name’s Chris Grayling and I’ve just renationalised a railway”.

However, Grayling was adamant that renationalisation was not a “long-term” solution.

The full text of Grayling’s statement can be read here.</s>Rail services on the East Coast Main Line will be brought back under public control following the termination of the franchise agreement with Virgin Trains East Coast (VTEC), Stagecoach Group has said.

The firm, which owns 90% of VTEC, said it was "surprised and disappointed" that the Government chose not to award it a new deal to continue running services on the London to Edinburgh route.

Trains will be run by the Department for Transport (DfT) through an operator of last resort (OLR).

Stagecoach pledged to "work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements".

Transport Secretary Chris Grayling told the Commons in February that the franchise would only be able to continue in its current form for a "very small number of months" as Stagecoach had "got its numbers wrong" and "overbid".

In November 2014, Virgin Trains East Coast - a joint venture between Stagecoach and Virgin - was awarded the franchise to run trains for eight years.

Stagecoach reported losses on the line and in November last year Mr Grayling announced that the franchise would be terminated in 2020 to enable it to become a public-private railway.

The decision to end the £3.3 billion contract this year has been described as a "bailout" by Labour and trade unions.

Mr Grayling insisted in February that "there is no question of anyone receiving a bailout".

He added: "Stagecoach will be held to all of its contractual obligations in full."

VTEC is the third private operator to fail to complete the full length of a contract to run services on the East Coast route.

GNER was stripped of the route in 2007 after its parent company suffered financial difficulties, while National Express withdrew in 2009.

Services were run by the DfT for six years up to VTEC taking over in 2015.
The British government renationalises the Virgin Trains East Coast-operated East Coast Main Line. The Department for Transport will run the rail service until 2020.