The decision could see Virgin Trains wiped from British railways indefinitely.
Transport company FirstGroup has won the franchise to run West Coast intercity trains, replacing Virgin Rail Group.
The line, which links Coventry to London, Birmingham, Manchester, Liverpool and Glasgow, has been run by Virgin Rail since privatisation in the 1990s.
The government announced that First, the majority partner in a joint venture with the Italian state operator Trenitalia, will take over intercity services on the London-Glasgow line from December.
The First-Trenitalia bid was chosen over a Chinese consortium led by the Hong Kong operator MTR, First’s partner on South Western routes.
The First-Trenitalia consortium will pay £1.6 billion in premiums to run the West Coast services – Britain’s most lucrative line – from December until 2026. The contract could run until 2034 if an extension is granted.
Keith Williams, who is leading the government’s rail review, endorsed the West Coast Partnership contract as “a step forward that is firmly in line with the review … capable of incorporating the reforms needed for the future”.
The Department for Transport pressed ahead with the West Coast award despite a high court case being brought by Stagecoach, Sir Richard Branson’s partner in Virgin Rail, after it was disqualified from the bid for refusing to accept pension liabilities.
If the decision is overturned by the court, we could see a repeat of the fiasco in 2012 when the West Coast contract was similarly awarded to FirstGroup, but then withdrawn after complaints and awarded to Virgin Rail.
Stagecoach said the award of the franchise would not have an impact on its continuing litigation against the Department of Transport.