THE multi-million pound battle for the East Coast Mainline last night appeared to take a decisive turn, with Sir Richard Branson's Virgin Rail set to be the loser.

Both Virgin and current operator GNER have been fighting it out to win the 20-year franchise for the line, a key link between London and the North-East.

It is now understood that the Strategic Rail Authority (SRA) has decided to reject Virgin's bid. It is a second blow for Sir Richard. His People's Lottery company failed only days ago to win the licence to run the National Lottery.

Reports of Virgin's failure came as Railtrack pledged to make the East Coast Mainline "better than it was before" the Hatfield rail crash.

It has been hit particularly badly by disruptions for track repairs with up to 100 speed restrictions being imposed on the line at its peak.

The SRA's report, meanwhile, into who should win the franchise is in the hands of Government ministers.

They could recommend that its decision be reviewed, but this is thought extremely unlikely and it is expected that GNER will take up the franchise from 2003.

GNER said it was "encouraged" by reports of its success and remained confident of its bid.

A spokesman for Virgin said it believed that it was still in the running and was awaiting a formal announcement in the new year, one which has already been postponed several times.

He told The Northern Echo: "We have not thrown in the towel yet and we still believe that we have the best bid."

GNER and Virgin suffered badly in a recent survey by the Strategic Rail Authority, which showed that passenger satisfaction with the two operators had dropped since last year.

They have, however, trumpeted billions of pounds worth of investment for the lucrative East Coast Mainline in a bid to win passengers over.

GNER is offering a new fleet of 25 tilting trains and upgrades to railway stations and the line.

Virgin's plans include a new high speed link turning off the current mainline at Peterborough and rejoining at Doncaster.

Both operators had been told by the SRA earlier this year that their bids were "not good enough" and needed more work.

Virgin's interest in the East Coast line was also investigated by the Office of Fair Trading with the company already running the West Coast equivalent.

Last night, the Government's railway watchdog, the Rail Passengers Committee, said it would be looking to meet with the franchise winner to discuss much needed improvements.

North-East secretary Ernie Preston said: "We are looking for a number of service enhancements and have already asked the bidders to incorporate as many as possible."

Engineers are gearing up to undertake major work on the line as part of Railtrack's drive to remove emergency speed restrictions.

More than three miles of track will be relaid at three locations.

New Railtrack boss Robin Gisby, who took over as director of its London North-East operation this week, said: "We aim to get the route more or less back to normal in the new year."

Unhappy passengers - Page