The UK Government has announced that it may take over the East Coast rail as the current franchise runs into losses.
The East Coast main line connecting London King’s Cross with Leeds, York, Newcastle and Edinburgh was originally privatised in 2015 after a joint venture (JV) between Stagecoach and Virgin signed a £3.3bn deal to operate the line until 2023.
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Stagecoach owns 90% of the JV, while the remaining is owned by Virgin.
The Department for Transport (DfT) noted in November last year that the JV is set to withdraw from the contract three years early in 2020 after running into difficulties, reported BBC.
However, this week Transport Secretary Chris Grayling informed the House of Commons that the situation is much more ‘urgent’ and new arrangements must be made as soon as possible.
In his speech, Grayling added that the current franchise will be able to continue for a ‘very small number of months’.
The operator has returned nearly £1bn to the government since 2015 as a result of the situation, while Stagecoach has incurred a total cost of almost £200m, representing around 20% of its entire market value.
Grayling added: “The problem is that Stagecoach got its numbers wrong. It overbid and is now paying a price.”
He also assured that daily operations will not be affected by the ongoing difficulties.
The secretary has suggested two options to tackle the situation.
The first approach would see the current operator continue to operate the franchise on a not-for-profit basis until it is awarded to a new company in 2020.
Alternatively, the government could step in and the East Coast Mainline would be run by the DfT via an operator.
