A TROUBLED York train company was today snubbed by Government rail bosses, who stripped it of a lucrative franchise.

Arriva Trains Northern, which has headquarters in York, has learned that it is not one of the final preferred bidders for the Transpennine Express franchise.

The Strategic Rail Authority (SRA) has invited two bidders, Connex Transport UK Ltd and First Group/Keolis SA, to move to the final stage of the replacement process for the franchise, currently run by Arriva Trains Northern.

The news will come as a huge blow to Arriva Trains Northern, which was confident that its bid for the service would be successful.

Transpennine Express runs services from Newcastle, through York, to Liverpool, Manchester and Blackpool.

Arriva Trains Northern also learned today that it must re-bid for its remaining rail services, after the SRA reopened the competition for the Northern franchise.

A statement released today by Arriva Trains Northern said the company was disappointed with the outcome of its bid.

A spokeswoman said: "Arriva believed its bid would have provided early and significant benefits for customers and good opportunities for employees, whilst meeting the requirements of the SRA.

"The SRA has opened discussions with Arriva concerning the extension of the Arriva Trains Northern franchise to summer 2004."

Richard Bowker, chairman of the SRA, said the new franchise had been created to meet the demand for fast, high-quality passenger rail services on longer journeys across the North of England.

Arriva Trains Northern had to re-bid for the lost service after the SRA decided to split its operation into new two franchises, Transpennine Express and Northern.

The SRA anticipates announcing the preferred bidder for Arriva Trains Northern's lost service early in the New Year.

Mr Bowker said: "Today's initiatives bring stability and clarity for passengers in the north of England and the Transpennine franchise will deliver a new generation of fast, frequent and high- quality services between key northern destinations."

Industry insiders may point to the current conductor and station staff strike at Arriva Trains Northern as being factors in the SRA's decision.

The company is still in the grip of the longest rail strike in Britain since 1922. Staff represented by the Rail, Maritime and Transport union and Transport Salaried Staffs' Association are demanding new pay structures.

An RMT spokesman said the decision did not surprise the union but did not wish to comment further.

Ernie Preston, secretary of the York-based Rail Passengers' Committee, said: "ATN may have missed out this time but it is still very much in the running for the Northern franchise."

The SRA has opened negotiations with ATN on an interim franchise to operate services until the Transpennine franchise commences in late 2003 and Northern Rail franchise commences in the summer of 2004.

Updated: 11:47 Wednesday, November 06, 2002