Stagecoach, which partners Virgin Group in running Virgin Trains, has been banned from three franchise competitions due to a row over pensions.
The decision by the Department for Transport (DfT) means the operator’s bid to run trains after its current deal expires in March 2020 has been barred.
Virgin Group boss Sir Richard Branson wrote in a blog post that he was “devastated” by the Government’s decision, claiming Virgin Trains is “one of the best train companies in the UK, if not the world”.
Virgin Trains has run West Coast services since 1997 and has been praised for introducing a number of passenger benefits such as automatic delay compensation payments, scrapping Friday afternoon peak ticket restrictions and launching free on-board entertainment system Beam.
Latest research by Transport Focus found that the operator has a 90 per cent customer satisfaction rating, which is the highest for all long-distance franchises.
Sir Richard wrote: “Running the railway comes with many challenges and the West Coast Main Line was struggling when we took it over, but we were determined to turn it around.
“With new trains, new track and our incredible team, we have become renowned for the award-winning way we look after our customers.”
He added: “We are still looking closely at the decision and we are now considering our options.”
The winning bidder for the West Coast Partnership franchise – due to be awarded in June – will be responsible for services on both the West Coast Main Line from March 2020, and designing and running the initial HS2 high-speed services from 2026.
A joint bid had been entered by Virgin, Stagecoach and SNCF.
Stagecoach said it was informed by the DfT that it has been banned from the East Midlands, South Eastern and West Coast Partnership franchise competitions after submitting non-compliant bids “principally in respect of pensions risk”.
Bidders for the franchises were asked to bear the full long-term funding risk on relevant sections of the Railways Pension Scheme, Stagecoach said.
The firm’s chief executive Martin Griffiths said: “We are extremely concerned at both the DfT’s decision and its timing. The Department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.
“We have drawn on more than two decades of rail experience and worked in partnership with local stakeholders to develop high quality proposals to improve each of these rail networks.”
The DfT claimed Stagecoach “breached established rules” and insisted the company is “responsible for their own disqualification”.
It added: “We have total confidence in our process.”
Dutch state-owned company Abellio will take over the East Midlands franchise from Stagecoach, which has its headquarters in Perth, on 18 August.
Passengers will benefit from new trains with more peak-time seats, reduced journey times and more than £17 million of station improvements, the DfT said.
Analysis has revealed that 60 per cent of rail journeys will be on trains operated by overseas companies or governments once Abellio begins running the route, which stretches from London St Pancras International to Northamptonshire, the East Midlands, Lincolnshire, Staffordshire and South Yorkshire.
Germany has the biggest influence at 21 per cent, followed by the Netherlands (14 per cent), France (8 per cent) and Hong Kong (7 per cent).
The figures take into account the total journeys made with each operator in 2018, and what proportion of their ownership is based outside the UK.
Abellio was handed an eight-year contract despite the head of a Government-commissioned review into Britain’s railways recently declaring that franchising “cannot continue” in its current form.
Keith Williams, chairman of the Rail Review, said the way train companies are contracted to run services is “no longer delivering clear benefits”.
His inquiry will conclude in the autumn.
In relation to the South Eastern franchise competition, transport secretary Chris Grayling announced that his department is negotiating with current operator Govia to extend its deal to November 10, with the option of a further extension to April 2020.