During December 2006, the previous franchisee Sea Containers, operating via its subsidiary Great North Eastern Railway (GNER), was stripped of the franchise after failing to meet overly-generous payments.
During August 2007, National Express was awarded the franchise via a competitive tender; its bid was criticised for having offered similarly onerous payments to GNER.
[5] During January 2002, the Strategic Rail Authority announced that the refranchising process had been scrapped, with an interim extension to GNER's contract being given as a stopgap measure.
[8] Sea Containers emerged as the victor, being awarded a new seven-year franchise by the Department for Transport, commencing in May 2005, along with an option for a three-year extension dependent on performance targets being met.
[9][10] However, the awarding was subject to criticism that, amid aggressive bidding between the competing companies, GNER had committed itself to fulfilling an overly generous arrangement that may not be financially realistic, and was accused as having overbid to secure the franchise.
[14] In July 2006, rumours began circulating that Sea Containers would be prepared to sell its GNER franchise in an effort to stave off resorting to Chapter 11 proceedings to secure itself from its creditors.
[17] In February 2007, the Department for Transport announced that Arriva, First, National Express and Virgin Rail Group had been shortlisted to lodge bids for the new franchise.
[19][20] Under the terms of its franchise agreement, National Express committed to paying a £1.4-billion premium to the Department of Transport over a time span of seven years and four months.
[21] According to industry periodical Rail, even the Department of Transport had classified National Express' bid as having "medium risk", although this would not be made public until years later.
[3] Professor Felix Schmid of the University of Birmingham's Centre for Railway Research and Education, has claimed that National Express had gambled that it would receive a significant amount of revenue via compensatory payments for delays attributable to the East Coast's infrastructure owner, Network Rail.
[3] However, there was no mention of any new trains for achieving this capacity increase; instead, a number of recently withdrawn British Rail Mark 3 coaches that had been previously operated by Virgin West Coast would be transferred over to NXEC's control.
[3] Other promised improvement included the introduction of free Wi-Fi for passengers travelling in standard class, the provision of an additional 2,000 car parking spaces in close proximity to a number of its major stations, and a general reduction in journey times.
[3] By 2009, NXEC was under increasing financial pressure due to various factors, including compounding rises in fuel prices and the poor economic climate of the time, commonly known as the Great Recession.
In contrast to the company's projected revenue increases during its franchise, NXEC's actual operating income (generated primarily from ticket sales) had decreased by 1 percent during the first half of 2009.
[23] In response, Lord Adonis reiterated the findings of a 2008 National Audit Office report, which had concluded that the rail franchising system delivered good value for money and steadily improving services.
The trains leaving King's Cross on the half-hour generally terminated at Newcastle and served Stevenage, Grantham, Newark, Retford, Northallerton, Doncaster and Durham as well as Peterborough, York, and Darlington.