Sir Richard Branson has lost the battle to continue running the West Coast main line that his Virgin Rail company has been operating since 1997.
The Government announced that the fight to take over a new 13-year West Coast franchise had been won by FirstGroup.
Transport company FirstGroup, which already has a number of rail franchises including Great Western and ScotRail, will start operating the London to Scotland West Coast line in December.
Rail Minister Theresa Villiers said the new franchise would deliver "big improvements for passengers".
This new franchise will deliver big improvements for passengers, with more seats and plans for more services. Targets to meet on passenger satisfaction will be introduced for the first time in an InterCity rail franchise and passengers will also benefit from smart ticketing and from investment in stations.
The West Coast is the first of the new longer franchises to be let by the Coalition which has helped us secure real benefits for passengers by encouraging First West Coast Limited (as the company will be named) to invest in the future of the service.
Sir Richard Branson tweeted a statement where he said he was "extremely disappointed" with the decision, the franchise system was "flawed" and it was "extremely unlikely" that Virgin would bid again for a franchise.
Virgin Rail is 49% owned by another giant transport company Stagecoach which said that it was disappointed that its bid with Virgin to continue running the franchise had been unsuccessful.
It said it understood that Virgin was the Department for Transport's second-choice bidder and that that the reason it failed to win the new franchise was "because another bidder contracted to pay significantly higher premiums to the DfT".
After winning the franchise, FirstGroup announced a long list of promises, here are some of them:
- From December 2016; 11 new six-car electric 125mph trains and 12,000 more seats per day.
- Cut the cost of West Coast standard anytime fares by an average of 15% within the first two years.
- Improved journey time of 15 minutes between London and Glasgow.
- First West Coast is taking over responsibility for maintenance at 17 stations and will spend at least £22 million on a station investment programme.
- New direct service from London to Blackpool, Telford, Shrewsbury and Bolton.
- No job cuts to train staff or drivers.
FirstGroup chief executive Tim O'Toole said the company was delighted to win the franchise.
We are delighted to be selected by Government to operate this unique railway which connects communities across the country and plays a vital role in the UK’s economic growth.
Our winning bid is a deliverable proposition that is compelling for all who want to see a greater use of our rail networks. We will be making significant improvements including reduced journey times and introducing new direct services.
The Department for Transport said the franchise deal was worth £5.5 billion over the lifetime of the contract. The new franchise will begin on December 9 and will run for 13 years and four months.
RMT general secretary Bob Crow said:
FirstGroup and the Government should be left in no doubt this morning that we will mount a massive industrial, political and public campaign to stop any attacks on our members' jobs and the services that they provide to the travelling public as a result of this franchise award.
We are already preparing a ballot for industrial action in light of the threatened job cuts.
Virgin - who have operated the West Coast line for 15 years - saw an increase of passenger levels from around 13 million a year in 1997 to around 31 million a year now.