The UK government is to take the National Express East Coast rail service into public ownership after its parent company, National Express Group, announced that it will not provide any further financial support to ensure that it remained solvent.
National Express said that its profitability in the first half of the year would be adversely impacted by the £20m it would lose on the East Coast rail franchise.
Since it is no longer able to continue its rail franchise agreement, the UK government has established a publicly owned company that will take over the franchise from the point at which National Express East Coast ceases to operate. Existing operational staff will then be transferred to the new East Coast Main Line company.
National Express also operates rail services on the East Anglia main line and associated commuter routes. The company has said that it does not intend to default on its obligations in respect of these franchises. Notwithstanding, the government believes it may have grounds to terminate these franchises, and is exploring its options in that respect.
Andrew Adonis, transport secretary, said: 'It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging.'
The government now intends to tender for a new East Coast franchise operator from the end of 2010.
Richard Bowker, group chief executive of National Express is to leave the company to take up a position as chief executive designate of Union Railway in the UAE.