Virgin Trains, which Stagecoach Group holds a 49% stake in, will continue running services on the West Coast main line for a further 23 months.
The deal, announced by Transport Secretary Patrick McLoughlin, will see Virgin carry on with the London to Scotland route until November 9, 2014, after which the West Coast line will be let under a long-term franchise.
The Government announced the DfT could shorten the 23-month period “by up to six months if a subsequent franchise can be let on a shorter timescale.”
Stagecoach said under the new agreement Virgin will initially earn a fee equivalent to 1% of revenue with the DfT taking the risk where revenue and/or costs differ from those currently expected. Stagecoach Finance Director Martin Griffiths said: “We now want to press ahead and develop the West Coast business further, maintaining the high quality of service and bringing more improvements to our customers.
“We believe the future prospects for the West Coast franchise and the wider rail network are very positive.”
Patrick McLoughlin has ordered an independent inquiry into the franchise system, while halting the existing bidding processes. The fallout could impact on the rail divisions of First, which was originally awarded the West Coast main line, and National Express.