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Rail operator loses Yarmouth line

PUBLISHED: 09:52 26 November 2009 | UPDATED: 15:44 03 July 2010

National Express has paid the price for refusing to keep running the east coast rail line by losing its profitable East Anglia operations three years early.

National Express has paid the price for refusing to keep running the east coast rail line by losing its profitable East Anglia operations three years early.

The decision will cost National Express three years of profits from the line, which runs services from London's Liverpool Street station to several towns and cities including Peterborough, Norwich, Great Yarmouth, Ipswich and Chelmsford.

The Department of Transport announced this morning that it would not allow National Express to extend the East Anglia franchise beyond March 2011, when it comes up for renewal. It will start looking for a new train operator to run the line immediately, so that a new franchise can begin in April 2011.

Transport minister Lord Adonis said that National Express forfeited the chance to keep control of the East Anglia line until 2014 when it decided in July that it could no longer afford to run the east coast line. He confirmed that the company had otherwise hit the performance targets needed to ensure a renewal.

Lord Adonis considered stripping National Express of the East Anglia franchise with immediate effect, before deciding that the company should continue to run it until the current contract expires.

"My overriding concern has been to minimise disruption to passengers and staff, and cost to the taxpayer, while ensuring that train companies stand by their commitments," he said.

National Express surrendered the east coast line after concluding that it could not afford the £1.4bn cost of the franchise. It had originally argued that it could still keep running its other rail services despite the move - but Lord Adonis has been determined to take a tough approach.

National Express, which is trying to raise £360m from its shareholders and issued a profits warning in October, claimed it had run the East Anglia line well.

"Whilst this decision was expected given the event of the default of the National Express East Coast franchise, the company is disappointed given the excellent improvement in performance delivered by the Group over the past 5 1/2 years of operating the franchise," it said.

The east coast rail line is now in public hands. and the government is expected to raise fares by 5pc.

National Express will ask shareholders to approve its £360m cash call tomorrow. Its biggest shareholders, the Cosmen family, now own almost 20pc of the firm and have been campaigning against the rights issue. They are thought to still favour a tie-up with Stagecoach, who saw its suggestion of a merger rebuffed last month.

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