Virgin Trains loses West Coast Mainline franchise

Virgin Rail has lost its bid to continue running the West Coast Mainline and will be replaced by the UK's largest rail operator, FirstGroup.

FirstGroup had been the front runner to win the franchise after offering the highest bid.

The company said it would "offer substantial improvements in the quality and frequency of services".

But unions and rail campaigners warn jobs will be cut, fares will rise and catering services will be cut back.

FirstGroup already operates a number of rail routes including Great Western and ScotRail.

FirstGroup, under the name First West Coast Limited, will take over the franchise from 9 December and is due to to operate the service until 2026.

The company says it will introduce 11 new 125mph six-car electric trains on the Birmingham-to-Glasgow route and provide more direct services between destinations.

FirstGroup's chief executive Tim O'Toole said it was a good deal for the company and the public.

"Our bid also delivers value for taxpayers by returning premiums to the government underpinned by sustainable growth in passenger numbers and revenues from the utilisation of significant available capacity," he said.

First West Coast says it will return £5.5bn at net present value to the government over the franchise term.

That is believed to have been much higher than the amount offered by Virgin Rail which is 49%-owend by another transport company Stagecoach.

In a statement, Stagecoach said the reason it had failed to secure the new franchise was because FirstGroup had contracted to pay "significantly higher premium payments" to the Department for Transport.

BBC transport correspondent Richard Westcott says the West Coast franchise is the first of several big rail franchises up for grabs over the next few years, and the government is under pressure to get a good deal.

But picking the biggest bid comes with risks, because it is much harder for the company to make a profit, our correspondent says.

Sir Richard Branson's Virgin Rail has operated the West Coast franchise since 1997 after the privatisation of Britain's railways.

The West Coast Mainline route serves London, the West Midlands, the North West, North Wales and the Central Belt of Scotland.