PROFITS at inter-city rail operator Great North Eastern Railway (GNER) soared by nearly a third in the first three months of this year, it emerged yesterday.

GNER's parent company Sea Containers said earnings from the rail division climbed to $14.2 (£7.7m), from $11m (£6m) during the same period last year.

Sea Containers said the performance was better than expected, indicating strong underlying demand for the company's rail services.

In March, GNER won a renewed franchise in return for paying £1.3bn in premiums to the Treasury during the ten-year duration of the deal.

That figure was much higher than the £22m in premiums that GNER formerly paid to run the London to Scotland East Coast route, which links the North-East to the capital, and to Edinburgh.

Sea Containers said in its first-quarter results that the new franchise initially would cause the rail division's profits to fall by about a third.

However, it said: "Revenue growth should allow profits to rise to old franchise levels and better.

Passenger watchdogs warned at the time that the deal would cause fare rises and GNER conceded that it may result in fuller trains and cuts in its popular restaurant services.

It refused to rule out price rises on the route.

GNER is the latest private rail operator to announce large rises in profits from the railways.

Last week, rival operator FirstGroup said profits from its train operations rose 36 per cent, while National Express said in February that its rail profits had lifted by 76 per cent.

The East Coast Main Line runs from London's Kings Cross station, up the east coast via Peterborough, York, Darlington, Durham and Newcastle to Edinburgh, Aberdeen and Inverness.

The line carries more than 15 million passengers a year and generates revenues of about £400m.

GNER was the most popular choice among North-East businesses to win the East Coast Main Line franchise.

US-listed Sea Containers, which also runs ferries, sea freight services and hotels, said it made net losses in the three months to March 31 of $6.8m (£3.7m) against $16.9m (£9.2m) last time.