Virgin Trains boss confident firm will continue to run East Coast trains

It is "unlikely" that Virgin Trains East Coast will lose the right to run trains on the line despite pulling out of the existing contract, the operator's managing director has claimed.

David Horne told staff he is confident the Department for Transport (DfT) will not take over control of East Coast services, according to an internal memo seen by the RMT union.

Transport Secretary Chris Grayling told the Commons last month he will either put the franchise into public control through an operator of last resort - an Arup-led consortium - or negotiate a short-term deal with the incumbent.

Mr Horne's message stated: "To prepare for the unlikely event that an OLR (operator of last resort) is required, advisers from Arup, SNC-Lavalin and Ernst & Young have been appointed to provide advice to the DfT to ensure that rail services can operate seamlessly if a franchise agreement is not in place for any reason."

In November 2014, Virgin Trains East Coast - a joint venture between Stagecoach (90%) and Virgin (10%) - was awarded the franchise to run trains between London King's Cross and Edinburgh for eight years.

Stagecoach reported losses on the line, and in November last year Mr Grayling announced that the franchise would be terminated in 2020 to enable it to become a public-private railway.

Last month he told the Commons that it would only be able to continue in its current form for a "very small number of months".

Critics described the move as a "bail out", with Lord Adonis resigning as chairman of the National Infrastructure Commission after claiming it would cost taxpayers hundreds of millions of pounds in lost payments by the operator.

Transport Secretary Chris Grayling (Victoria Jones/PA)
Transport Secretary Chris Grayling (Victoria Jones/PA)

Mick Cash, RMT general secretary, claimed Stagecoach and Virgin are being "set up for a massive reward for failure at public expense".

He said: "This is Chris Grayling putting Tory privatisation ideology before the public interest and represents corporate welfare on an epic scale."

In his statement to the Commons last month, Mr Grayling said Stagecoach would only be allowed to run the franchise on a "not-for-profit basis", with any financial rewards received at the end of the deal and based on performance.