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GNER may lose its top train route GNER may lose its top train route
(about 1 hour later)
The UK government has asked train firm GNER to surrender its franchise on the main London to Edinburgh route after weeks of talks. The UK government has asked train firm GNER to surrender its £1.3bn-franchise on the main London to Edinburgh route.
Since the London bombings, GNER has run into financial problems as passenger numbers were lower than expected. GNER has faced financial woes since the London bombings, as passenger numbers dipped, power prices rose and Network Rail's compensation payments declined.
As a result it has been unable to continue with the current franchise, which involves paying hundreds of millions of pounds to the government. As a result it would not have been able to meet the terms of the franchise, which involved paying hundreds of millions of pounds to the government.
The UK government has invited new bidders for the route. The government has invited new bidders for the route franchise.
"As a result a new competition to run the London to Edinbugh service will begin, with a new contract to be signed within 18 months," said the BBC's transport correspondent Tom Symonds. It is not yet clear whether GNER and its parent company, Sea Containers, will bid for the contract, though a spokesman for GNER suggested it was likely.
Its not clear yet whether GNER and its parent company Sea Containers will bid for the contract, though a spokesman for GNER suggested it was likely. Sea Containers recently sought protection from its creditors under US bankruptcy law.
US firm Sea Containers recently sought refuge under bankruptcy protection rules. "The government made it clear that rail operators that fall into financial difficulty should expect to surrender the franchise and not receive financial support," said Transport Secretary Douglas Alexander.
"To do otherwise could set the precedent that we are willing to bail out operators at extra cost to the taxpayer."
Stepping up
Analysts said that GNER's rivals First Group and Virgin Trains will probably table a bid.
Earlier this week, the UK government gave Virgin trains a £1.4bn subsidy to run the London-to-Glasgow service and help offset high track charges.
Some rail operators have complained that the government is expecting too much revenue from their operations, making it difficult to run services profitably.
The BBC's transport correspondent, Tom Symonds, says a new competition to run the London-to-Edinbugh service will now begin, with a new contract to be signed within 18 months.
Ministers have announced a deal to allow GNER to continue to run its trains until a new franchise can be signed.Ministers have announced a deal to allow GNER to continue to run its trains until a new franchise can be signed.
According to Robert Mackenzie, chief of executive of Sea Containers and chairman of GNER, the rail company did not breach its franchise agreement but would not be able to meet payments that were due to start in May.
"We would have preferred a renegotiation of the current contract, but that was not available," said Mr Mackenzie.
GNER has been unable to meet the terms of the franchise, which required revenue growth of 10% last year.