The Department for Transport (DfT) has barred Stagecoach from three franchise bids across the UK because its submissions did not meet pension rules.

The ban applies to the South Eastern, West Coast and East Midlands franchises, the latter of which has been awarded to Abellio from August.

According to the DfT, Stagecoach’s bids for the franchises were “non-compliant” because they did not meet pension rules, which the rail operator claims come with a long-term funding risk.

In response, Stagecoach has said it would like an “urgent meeting” with the DfT to express its concerns over the decision, with group CEO Martin Griffiths saying in a statement that the conditions set out for the franchise bids are “more evidence that the current franchising model is not fit for purpose”.

The DfT claims other bids it had received met its requirements.

He added: “It also further damages the already fragile investor confidence in the UK rail market and it undermines the involvement of two of the last British transport groups who are part of running Britain’s railway.”

Stagecoach had bid for the East Midlands franchise on its own and had submitted a bid for South Eastern with Alstom. It also input a joint bid with SNCF and Virgin Group for the West Coast franchise.

The company was a franchise partner with Virgin Trains on the East Coast Mainline and had a 90 per cent stake in the operation, but the DfT took services back under government control last year after the firms said they risked financial hardship if they continued operating the franchise until 2023 as initially agreed. London North Eastern Railway (LNER) will run the franchise until a new contract is awarded in 2020.

The DfT has now announced that Dutch firm Abellio will take over the East Midlands franchise in August for eight years, with the possibility of a two-year extension at transport secretary Chris Grayling’s discretion.

Abellio already operates the Greater Anglia, Merseyrail, ScotRail and West Midlands franchises, as well as buses on behalf of Transport for London and the Event Connect service, which plans and manages travel for events.

Grayling said he was “pleased” to award the contract to Abellio and that the new franchisee would oversee the introduction of new trains due to replace the current stock. This will increase the number of morning peak seats into Nottingham, Lincoln and St Pancras by 80 per cent.

Grayling added: “Improving the experience for passengers is at the heart of this new franchise. Abellio will deliver state-of-the-art new trains, upgraded ticketing systems and improvements to stations. Through zero-carbon pilot schemes, trialling hydrogen fuel cell trains and delivering more seats on modern, spacious trains, the new franchise will also play a major role in building a railway fit for the future.”

Abellio UK MD Dominic Booth said the company intends to “invest £600 million in improvements to trains and stations, maximising the effect of the government’s £1.5 billion upgrade of the Midland Main Line”.

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