Virgin Trains are set to lose their contract to run trains via Milton Keynes after stakeholder Stagecoach was banned by the Department for Transport (DfT).

The rail and bus company has been verbally informed by the DfT that irregularity in filling a gap in the pension plans for UK railway employees has been behind the move to ban them from 3 currently ongoing franchise bids, including Virgin’s InterCity West Coast franchise.

It has been reported that Stagecoach and the government disagreed on plugging a railway pensions scheme deficit estimated by the Pensions Regulator of being worth around £6bn.

Stagecoach has declared in their own response to the news that the private sector shouldn’t be expected to bear long-term funding risks, and that the government was pursuing a high-risk strategy to fund the gaps. In their own response, the government has declared Stagecoach as directly responsible for their own disqualification from the processes after going against the bid requirements.

As well as the newly revamped InterCity West Coast franchise that will include High Speed 2 operation when opens, Stagecoach bids have also been discounted from the East Midlands and South East franchises.

The move means a joint bid between Stagecoach, Virgin and TGV operator SNCF has been dropped from the process. It also means that East Midlands has been automatically awarded to Dutch firm Abellio, while the South Eastern contest is to be re-run and the current deal is extended.

Virgin declared their disappointment in a statement. They said, “We’re very disappointed by the DfT’s unexpected decision. We’re studying the DfT’s decision carefully to understand why they’ve taken this action and would like to reassure all our customers that they can still book and travel as normal.”

Unless a change takes place, the move will end the Virgin Trains’ brand’s operation on UK railways. Virgin first began operating trains in the UK in 1997, and has run the West Coast express route from London to Birmingham, Manchester and Glasgow ever since.

The decision on a new operator on the West Coast franchise is due to be made in June. Two other bids have been lodged, with one being a joint bid between First Group and Trenitalia, while the other is a joint bid between Chinese company Guangshen, Hong Kong-based firm MTR and Spanish operators RENFE.