Sea Containers, the owner of the GNER train company which operates the InterCity East Coast service, is disappointed by the decision of the Department for Transport to award the new ten year franchise to a new operator rather than to the Virgin and Stagecoach consortium of which GNER was a part.

Last December, GNER voluntarily entered into a Management Agreement with the Government to continue delivering train services after the early ending of the ten year franchise which had begun in May 2005. This was the result of a number of unexpected external events, beyond GNER's direct control, which undermined the sustainability of the InterCity East Coast franchise over its 10-year lifetime.

These events included the loss of revenue due to the London bombings in July 2005, higher energy and fuel costs, and regulatory permission being granted for a new open access entrant on the route. While GNER was never in breach of the franchise agreement, it was apparent that the company was not going to be able to meet the significant increase in franchise premium obligations due from May 2007.

Bob Mackenzie, Chief Executive Officer of Sea Containers and Executive Chairman of GNER, said in response to the decision:

"This will be a sad day for the GNER family of passengers and staff as well as the businesses associated with GNER from Sea Containers itself to the suppliers we have worked closely with over many years.

"We were never in breach of the ten year contract, but due to all of the unforeseen circumstances and the considerable step up in premium this year Sea Containers was likely to lose GBP50 million had we held onto the franchise. We therefore voluntarily agreed with the Government to enter into the management contract. This has allowed GNER to provide the original benefits under the terms of the 2005 franchise and make a profitable contribution to the parent company every month since last December.

"By teaming up with Virgin and Stagecoach we were part of a strong and robust bid for the next franchise and so we are disappointed that the Government has decided that our combination of talents did not meet its financial requirements."