A TRAVEL firm has officially been confirmed as the new East Coast rail franchise operator.

The Government today (Wednesday, December 10) signed an eight-year deal with Inter City Railways, a venture between the Stagecoach Group and Virgin.

Bosses say the plans will create the first ever direct links to London from Middlesbrough and Thornaby, near Stockton, and a new London to Sunderland service.

The route will use trains made at Hitachi Rail Europe’s factory in Newton Aycliffe, County Durham, which will open in 2016 and deliver the rolling stock in 2018.

Inter City Railways will pay the Government about £3.3bn to operate the franchise and plans to invest £140m into services.

The agreement was first announced last month, taking many by surprise after strong speculation had linked French-owned Eurostar and Keolis with a takeover of the route from the publicly-run Directly Operated Railways.

However, ministers chose Inter City, hailing its value to taxpayers, with the agreement starting in March 2015 and running until 31 March 2023.

Martin Griffiths, Stagecoach Group chief executive, said: “This is a hugely exciting time and about £140m will be invested.

“While it officially begins in March next year, our team are already planning ahead to build on the strong pride, heritage and success at East Coast.

“We will be working closely with employees and the management team to ensure a smooth transition to the new franchise.”

The Government has the option of a one-year extension, with the trains operating under the Virgin Trains East Coast brand.

The agreement was announced as Stagecoach, which runs bus services across Teesside, Hartlepool, Sunderland and Newcastle, and operates the Megabus fleet, revealed its half-year results for the period to October 31.

Mr Griffiths highlighted the company’s bus division, as revenues increased to £1.54bn and total operating profits lifted to £123.5m, with pre-tax profits steady at £98.3m.

He also revealed it was shortlisted for the TransPennine Express rail franchise and was hopeful of agreeing new deals for services on the East Midlands and South Western franchises.

He added: “These are a good set of results.

"Despite facing a number of challenges, our UK commercial bus operations have continued to grow, helping support the economies of some of the country's biggest city regions.

“Our Megabus branded coach services in the UK, mainland Europe and North America have also helped create hundreds of new jobs.

“The group is in excellent financial shape; we are shortlisted for the TransPennine Express franchise and look forward to agreeing new franchises to extend our time at East Midlands Trains and South West Trains.”

Speaking about the East Coast deal, Transport Secretary Patrick McLoughlin, said: "This is a fantastic deal, which will give passengers on this vital route more seats, more services and new trains, and give British taxpayers outstanding value for money."