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Sir Richard Branson's reacted angrily to news his Virgin Trains company's lost the right to run trains on the West Coast Main Line between London and Scotland, passing through places like Milton Keynes, Northampton and Watford.
Virgin Trains have been operating high speed trains on the West Coast Main Line since 1997, but their franchise will come to an end in December 2012.
The 13-year West Coast franchise has instead been awarded to the company First Group, who operate other parts of the UK rail network - including the First Great Western and First Capital Connect franchises.
Announcing the new franchise winner, Rail Minister Theresa Villiers said the new franchise would deliver "big improvements for passengers, with more seats and plans for more services."
But the RMT transport union warned of "massive cuts to jobs and passenger services and huge increases in fares''.
Virgin has operated the West Coast line for 15 years, introducing tilting high-speed Pendolino trains to the route and increasing passenger levels from around 13 million a year in 1997 to around 31 million a year now.
Virgin Rail is 49% owned by another giant transport company Stagecoach which said today that it was disappointed that its bid with Virgin to continue running the franchise had been unsuccessful.
It said it understood that Virgin was the Department for Transport's (DfT) second-choice bidder and that that the reason it failed to win the new franchise was "because another bidder contracted to pay significantly higher premiums to the DfT''.
FirstGroup chief executive Tim O'Toole said the company was delighted to win the franchise.
He went on "We will be making significant improvements including reduced journey times and introducing new direct services.''
The deal will see the introduction, from December 2016, of 11 new six-car electric trains which will enable more seats to be provided across the franchise, including greater capacity on the Birmingham to Scotland route.
New services are planned from Blackpool, Telford, Shrewsbury and Bolton to London. FirstGroup has also committed to cut the cost of West Coast standard anytime fares by an average of 15% within the first two years.
The franchise stretches from London to Glasgow, connecting many of the UK's major cities including Manchester, Liverpool, Birmingham, Wolverhampton, Edinburgh, Lancaster and Chester.
The DfT said the franchise deal was worth £5.5 billion over the lifetime of the contract. The new franchise will begin on December 9 and will run for 13 years and four months.
Ms Villiers said: "This new franchise will deliver big improvements for passengers, with more seats and plans for more services. Targets to meet on passenger satisfaction will be introduced for the first time in an InterCity rail franchise and passengers will also benefit from smart ticketing and from investment in stations.
"The West Coast is the first of the new longer franchises to be let by the Coalition which has helped us secure real benefits for passengers by encouraging First West Coast Limited (as the company will be named) to invest in the future of the service.''
In a statment, Sir Richard Branson said: "The Government decision to award the West Coast Main Line Franchise to FirstGroup is extremely disappointing for Virgin and for our staff that have worked so hard to transform this railway over the last 15 years.
"We submitted a strong and deliverable bid based on improving customers' experience, increased investment and sustained innovation.
"To have bid more would have involved dramatic cuts to customer quality and considerable fare rises which we were unwilling to entertain.
"We also did not want to risk letting everybody down with almost certain bankruptcy at some time during the franchise as happened to GNER and National Express who overbid on the East Coast mainline.
"Sadly the Government has chosen to take that risk with First Group and we only hope they will continue to drive dramatic improvements on this line for years to come without letting everybody down.
"We won the franchise in 1997 with an agenda to change radically the way people viewed and used the train.
"At the time the track was run-down, staff demoralised, the service riddled with delays and reliant on heavy subsidies.
"We set hugely challenging targets to dramatically speed up journey times with modern tilting trains, increase the frequency of the service, improve the on-board experience; as well as double passenger numbers and return the line to profit.
"We were told it was 'Mission Impossible' and our plans were laughed at by critics.
"However, 15 years later, despite continued problems with the track, we have achieved our targets.
"Passenger numbers have more than doubled to over 30 million, the fastest growth in the UK and world leading.
"We have the highest customer satisfaction of any long distance franchise operator and dominate the air/rail market between London and Manchester.
"It has been a remarkable achievement by an outstanding team who have successfully delivered on our promises.
"I am immensely proud of our staff for turning the West Coast line from a heavily loss-making operation into one that will return the taxpayer billions in the years to come.
"Last year we paid a net premium of £160 million to the taxpayer and have created a franchise worth more than £6 billion which is hugely valuable to the country.
"These achievements have counted for little - as this is the fourth time that we have been out-bid in a rail tender.
"On the past three occasions, the winning operator has come nowhere close to delivering their promised plans and revenue, and has let the public and country down dramatically.
"In the case of the East Coast Main line, both winners - GNER and National Express - over promised in order to win the franchise and spectacularly ran into financial difficulties in trying to deliver their plans.
"The East Coast is still in Government ownership and its service is outdated and underinvested, costing passengers and the country dearly as a result.
"Insanity is doing the same thing over and over again and expecting different results.
"When will the Department for Transport learn?
"Interestingly before Virgin took over the West Coast there were more passengers using the East Coast than the West Coast. Now there are 12 million fewer.
"Under our stewardship, the West Coast Mainline has been transformed from a public liability into a valuable asset for the UK, worth many billions of pounds.
"The service is a British success story and one to put up against rail companies around the world.
"It is a great shame that such a strong track record has been discounted in the evaluation process for one of the UK's most important infrastructure assets.
"The country's passengers, taxpayers and the West Coast employees deserve better.
"Based on the current flawed system, it is extremely unlikely that we would bid again for a franchise.
"The process is too costly and uncertain, with our latest bid costing £14 million.
"We have made realistic offers for the East Coast twice before which were rejected by the Department for Transport for completely unrealistic ones and therefore will have to think hard before embarking on another bid.
"Our amazing staff have been the driving force behind the West Coast Main Line's transformation and I am sure that for the last months of the contract they will all continue to run the high quality service that has helped win us many awards and attract millions more customers to rail.''
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