NATIONAL Express Group began operating the UK's prestigious InterCity East Coast franchise on December 9, replacing Great North Eastern Railway which had held the previous franchise until the operator and its parent company hit financial difficulties.

The new agreement covering 200 km/h services between London, Yorkshire and Scotland via the East Coast Main Line runs to March 31 2015, and will see NEG pay the government a premium with a net present value of £1·4bn. This compares with the £1·3bn which GNER had bid under its failed franchise, which began on May 1 2005 and was predicated on revenue growth of 8·6% per annum.

During summer 2006 it became apparent that GNER's ambitious target was not being achieved, and parent company Sea Containers announced that GNER would not be able to meet a significant increase in premium payments which was due from May 2007. The government refused to renegotiate the franchise, and following financial problems with other businesses which saw Sea Containers obtaining Chapter 11 bankruptcy protection in the USA, the company announced in December 2006 that it would hand back the franchise.

GNER continued to operate the services under a temporary management contract signed on December 14 2006, and had to meet the costs of re-letting the franchise early (RG 1.07 p6).

In a separate transaction, NEG has purchased the Sea Containers Rail Services telephone call centre in Newcastle.

• CAPTION: National Express East Coast immediately launched a 100-day joint performance improvement plan which it had agreed with infrastructure manager Network Rail in advance of the December 9 handover