Ministers are "developing contingency plans for a replacement for Northern rail", Boris Johnson has said.
His comments came as Labour's Yvonne Fovargue called on the Prime Minister to "commit to stripping them of their franchise".
Speaking during Prime Minister's Questions in the Commons, the Labour MP for Makerfield also urged Mr Johnson to "commit to devolving the power and the money to the regions so that local people have the power over their local transport".
Mr Johnson said he shared Ms Fovargue's "outrage", adding that ministers were "also looking at the whole way the franchising system operates".
Ms Fovargue said: "Finally it appears that some action is being taken against Northern rail.
"Will the Prime Minister commit to stripping them of their franchise and will he also commit to devolving the power and the money to the regions so that local people have the power over their local transport and never have to suffer the appalling catalogue of delays, overcrowding, cancellations and disruptions that have gone on far too long."
Responding, Mr Johnson said: "I must say I share her outrage and I do understand what she is saying and we are developing contingency plans for a replacement for Northern rail, but what we are also doing and she raises the point, we are also looking at the whole way the franchising system operates and she'll have seen (the) Keith Williams' very, very valuable report on that."
Transport Secretary Grant Shapps announced last week that train operator Northern is to have its contract ripped up.
But Department for Transport officials later clarified that Northern could continue to operate services through a new, short-term contract.
The Prime Ministers comments come as northern leaders meet in Leeds to discuss the state of the railway in the North of England.